Councils may soon be able to keep rental and receipts from Right to Buy sales

The Communities and Local Government Department (CLG) has announced plans to encourage local authorities to build more council houses.

It wants to let councils keep the rental income from the houses they build as well as receipts from homes sold through Right to Buy.

Councils only build a few hundred council homes a year with the majority being built by registered social landlords, the department said in a release.

The Communities and Local Government Department (CLG) is set to invite councils to bid for a share of the capital grant given to social landlords to subsidise the cost of new housing.

Currently, rental income is pooled national and redistributed to councils through the Housing Revenue Account Subsidy System. Seventy-five per cent of the capital receipt from any council home sold under the Right to Buy is currently pooled nationally to reflect the historic investment in council house building. Neither is council house building supported by Social Housing Grant or any other capital or revenue subsidy from government, other than PFI schemes.

Housing minister, Margaret Beckett, said she thought the plans could support construction through the downturn. “We are determined to keep housebuilding going in the current climate as the long-term need for more homes is not going to disappear.

“These new freedoms will encourage councils to play a bigger role in driving forward the delivery of new affordable homes for families in need.”

CLG issued a consultation on the proposals today.

The current review of Council Housing Finance is looking at all aspects of finance including the HRA system and will report to ministers this year.