What’s on the menu for LA stock?

This year’s housing Green Paper laid out a spread of alternative models from which councils were asked to pick. Dish of the day was clearly stock transfer, but arms-length companies, private finance initiatives and council housing were fare for the future, as long as councils could pick up the tab.

But, as the Local Government Association’s Housing Finance survey shows, far from housing departments choosing from a menu of options, stock transfer is increasingly looking like the only dish that councils can afford. The survey, released last week, looks at council house rents, management and maintenance funds, and housing subsidy, drawing directly from data submitted to DETR.

As the tables here show, the pressures described by the LGA last week as "a significant influence on councils’ decisions to transfer" (Housing Today, 19 October) come starkly into relief. The financial picture for local authority housing finance is grim.

Nearly 50 per cent of housing department in all councils raised their rents in excess of government guidelines. As the tables here show, the rise of £1.81 overshot the £1.71 target, even though the rules allowed for the biggest increase for five years.

Yet despite the rent rises, a hefty £239 shortfall remained between the government’s management and maintenance allowance of £1,016 per dwelling and councils’ actual expenditure, of an average of £1,255 per home. And 90 per cent of authorities pay more in rent rebate than they receive in Housing Revenue Account subsidy. For the seventh year running, the housing element of the Housing Revenue Account is negative, to the tune of £1,083m.

Lynne Pennington, head of strategy and regional development for Leeds city council speaks for many when she says: "The negative subsidy affects our ability to redevelop - of course". On the surface, stock ownership and transfer statistics simply show an accelerating transfer process. In a year the number of houses in local authority control tumbled by 5.2 per cent, to 3 million dwellings, gearing up from the previous years fall of 3.7 per cent.

Yet the speed of transfer seems to be running well in advance of local council’s expectations. A Housing Today Survey last year found that 70 per cent of local authorities expected to continue to manage their own stock - with a mere15 per cent expecting to transfer (Housing Today, 30 September 1999).

Where rents have been kept down the most - the North West and Merseyside, and the West Midlands - the move to stock transfer has been most dramatic. Coincidence?

Enter the Green Paper this April. And although the proposals only tout stock transfer as "an important option" the financial inducements and private investment are attached to stock transfer like no other option.

Marlene Bailey, lead officer at Calderdale stock transfer team leader, where a 67.7 per cent vote in favour was recorded in a stock transfer ballot this month, says: " We’ve got £112m of repairs and improvements to bring our properties up to standard. Our rents were kept within guideline levels, and we had to make cuts in this financial year - thus resulting in the situation where this level of investment is required".

"Our tenants do not want just bricks and mortar, but job creation and regeneration. The only way to get investment in was to go down the stock transfer route. If the council had been able to borrow similar levels of money there wouldn’t be been a move down this road".

Even some of the housing departments which have embraced stock transfer admit freely that their decision is pure political pragmatism:

"The options were apparent for balancing our books," says Peter Walls, Director of Health and Housing for Sunderland council. "We can raise rents above guidelines or curtail expenditure on housing. Against that backdrop, we agreed that our aims were high standards of housing at affordable rents, and we looked at which of the options would deliver that. Only stock transfer did that."

Walls also argues that its not just getting out of a tight financial squeeze that has predisposed Sunderland towards the stock transfer route, but people power. The vehicle of social housing as provided by the council has gone down the drain, as it’s lost a positive image. There’s low demand here for council housing. Tenants are voting with their feet and against that backdrop we made our decision."

"I’ve been in housing for 30 years and even then people were saying - all we’ve really got to do is get the government to change their priorities and invest in housing. How long do we wish our tenants to wait, or sit back and watch council housing go down the plug hole?"

But Peter McLoughlin, Sheffield Council’s cabinet minister for housing says that his council has been force-fed the options. Sheffield council has decided this month that it has no choice but a whole-sale stock transfer or the formation of an arms length company - options tenants have overwhelmingly opposed.

"There will to change and modernise exists here already. It could be done without stock transfer if it wasn’t for the many years of underinvestment resulting in an £800-£900m backlog that we can only nibble away at. Of the options in the paper only stock transfer comes anywhere near enabling us to raise the kind of investment required."

Arms length companies, moving increasingly into the foreground, appear to some councils as a financial compromise. Pennington, at Leeds, feels that the volatility of current housing policy rules out committing their housing to stock transfer.

"Elected members and tenants decided that they want to remain in local authority hands. With the forthcoming DETR consultation paper on rent-restructuring and the introduction of MRA, there are too many changes for it to be appropriate to move to stock transfer," she says.

She adds: "We were very disappointed with the emphasis in the Green Paper, which was very clearly put on stock transfer. However we were pleased that the additional option of arms length was introduced."

But she concedes that this won’t be the biggest revenue raiser. "On the face of it, it doesn’t yield the same amount of investment as stock transfer, although its too early to tell," she says.

So, if dinner has been served, are there only two meals available? Despite this week’s figures, it may be too early to tell. Some, like John Perry, policy director at the Chartered Institute of Housing, point to the slack which may alleviate housing departments with the advent of the MRA.

But as Paul Schofield of Tenant Participation Advisory Service says: "We’re still being told "transfer and get more investment. Stay with the council and get jam tomorrow". For those councils who can’t or won’t transfer their housing, the HRA remains starvation rations.