… but they won’t be built without reform of public finance

Before the Budget, headlines were dominated by an expected return to council housebuilding, following the prime minister’s commitment in January to remove barriers preventing councils from building. This raises the question of whether responsibility for affordable homes will finally start to move away from housing associations and housebuilders – and trigger a huge shift in the way the industry is structured.

While the devil will be in the detail (is it new money or existing funds?), it now looks as if the Homes and Communities Agency will open its investment programme directly to councils. This is an important step in the right direction. But – and it’s a big but – access to government investment is only part of the equation. Unless the government is prepared to reform the system that governs local authority finance (specifically the housing revenue account, or HRA), we will be selling ourselves short.

The HRA holds most of the resources available to councils to improve and maintain homes, and it also has significant potential to enable investment in new housing supply. But use of those resources is governed by an outdated rule book.

The rules prevent councils from borrowing against their assets – the council homes

Basically, the rules prevent councils from borrowing against their assets – the homes – to invest in construction, in the way an independent organisation could. More than 100,000 homes could be built over the next decade if councils’ rental income were freed up – and that figure would treble if councils could borrow against their assets.

In addition, many councils have lost much of their development expertise. A priority would be to work quickly to build on existing partnerships, and forge new ones with housebuilders, housing associations and lenders.

With its £100m boost, the Budget has provided a welcome first step for councils and their development partners. But for all the initial excitement, attention will remain focused on whether the expected consultation on HRA reform delivers.

Postscript

Richard Capie is director of policy at the Chartered Institute of Housing.