John Healey wants Local Housing Company pilot scheme in Barking to be built by the end of the year

John Healey, the housing minister, has intervened to get the government’s floundering Local Housing Company initiative off the ground, two years after the programme was first announced.

The scheme aimed to get councils and developers to form joint ventures – LHCs – and build 35,000 homes, but no homes have been built, amid concerns about the legal status of the new vehicles.

However, a civil service source said Healey had “put a rocket up the backsides” of Homes and Communities Agency (HCA) and communities department staff to make sure the first homes would be built in Barking and Dagenham by the end of the year.

Ken Jones, housing director at Barking and Dagenham council, said that following the minister’s support, the borough’s joint venture with developer First Base was on track to build 30 homes on their Williams Street Quarter plot by December. He said the government now accepted that the vehicles isolated it from risk, because councils had only put in land and not money.

Previously the Treasury had feared that councils or central government could be liable for losses if any LHCs went bankrupt.

Healey’s intervention comes in advance of an Office of National Statistics (ONS) decision on the status of the vehicles, which will rule if they will be counted as part of government spending.

Helen O’Doherty, acting project director at the HCA, said: “There will be issues about whether this is a replicable model if the ONS rules it is on the public balance sheet.”

Barking is the most advanced of the 14 LHC pilot projects. The council is hoping to complete 750 units over four years in its £130m programme, down from an initial plan for 1,100. It is currently tendering for contractors for its framework.