The idea could see special organisations created to manage, maintain and improve the stock over a period of up to 50 years, though it may require a change to the public sector borrowing rules.
Transport, local government and the regions secretary Stephen Byers is known to favour allowing councils at least limited financial freedoms in addition to the four stock options currently available. An announcement on various aspects of housing finance is expected at the end of the month.
The leasing option is being developed by consultant Hacas Chapman Hendy in partnership with a Greater Manchester Council. They have sounded out lenders and the Housing Corporation in addition to holding a series of meetings with civil servants.
The option could prove attractive, as the only private borrowing needed would be to fund improvements. Councils would still own the freehold to their stock.
The aim would be to offer the new landlord a long lease of at least 30 years. Another 20 years could be added because lenders would require a long “tail” beyond the final repayment date to prevent them being disadvantaged by any changes to the business plan.
An intermediary vehicle to receive private funding might also be necessary.
The landlord would not pay an initial price but would make annual payments to the council as a lease premium. The council would be left unable to service its housing debt with no rental income, but would use the lease premiums to meet the cost.
Hacas Chapman Hendy director Richard Beal said the financing would depend on the council’s debt roughly equating with what would have been the purchase price. It is understood this is not a barrier in the case of the Greater Manchester town.
Many issues remain to be resolved, including the type of consultation needed with residents, and whether the DTLR would require a ballot.
Beal said: “Our position is that leasing does not take the landlord’s borrowing outside the PSBR so if it infringes the rules, that would preclude funding being secured. However, we have put the position to the DTLR to see if there is an option to review its stance on lending to leasehold organisations.”
Meanwhile, tenants of some metropolitan councils are being pushed toward transfer simply because there is no other option, the Housing Quality Network has said.
Responding to the government’s Best Value review, which is looking at the creation of a level playing field among private, public and voluntary sector providers, HQN said: “By dint of the finance regime for social housing, the cards are well and truly marked on too many occasions.” Tenants need to be given a neutral choice, it argues.
Source
Housing Today
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