A new foundation for Council homes?
August 20th 2009
Some very significant and positive developments have just been announced regarding affordable homes in Southampton.
First, the government has announced that £1.5 billion will be allocated to build 20,000 new affordable homes over the next two years. It is estimated this funding will create an estimated 45,000 additional construction jobs across the country.
Second, Southampton is likely to receive about £9 million from the government to kick start building projects that have stalled due to the recession.
Third, the government has announced that they will exclude all newly built council housing from the Housing Revenue Account (HRA) subsidy system, which means that councils will retain in full the rent and capital receipts from these homes.
Taken together, these measures could amount to the biggest expansion of UK affordable home building since the 1960s, while at the same time placing council homes on a much more stable long-term financial base.
For the uninitiated, the Housing Revenue Account system is how the government distributes funding for council housing to local authorities. A proportion of the revenue gained from council house rents and sales goes into a central government pot, which is then re-allocated to the various housing authorities across the country.
Southampton has for many years benefited from this system, as the city’s housing stock regularly received between £3-4 million more than we paid in. However over the last three years that situation has slowly changed, with the city now slipping into a situation where we pay more into the central pot than we get back out.
As Echo readers may know, MPs and Councillors have been working to resolve this imbalance for some time. Conservative Councillors have done some lobbying on this issue too, although their stance is perhaps somewhat undercut by their party’s commitment to cut funding for the relevant government department by £240 million this year.
It was lobbying by MPs and Councillors that contributed to the government’s decision a few months ago to cut this year’s proposed rent rise for council homes by 50%.
But this new decision to let Councils keep much more of their revenue from Council housing is potentially even more significant.
It opens up a golden opportunity for councils like Southampton to build a new generation of council homes, secure in the knowledge that any revenue derived from those homes in the future would always be there. This will give councils a much more secure foundation of revenue from which to invest in both new and existing council housing stock.
The real challenge now is to ensure the Council really seizes this opportunity, and does not just put in a token bid to build a few more homes and leave it at that. The first round of bidding for funding for new homes has just ended, but another is due later in the year. I strongly urge Southampton to bid for funding for as many new homes as possible.
What do you think of this story? Email Alan