Shapps to allow councils to keep rent and sales receipts from housing

Local authorities will be able to keep all the rent and sales receipts they collect from council housing, the Housing Minister has vowed.

Grant Shapps said the housing revenue account (HRA) subsidy system was “no longer fit for purpose”. Under the current regime, councils are required to pay rents and the majority of receipts from sale of land or homes to central government, which then decides how it should be redistributed to councils.

The Housing Minister said councils would have to take on additional housing debt in return for greater financial freedoms. The Department for Communities and Local Government has insisted that no council would have to take on a level of debt that is not sustainable in the long term.

Further details of how the new system will work will be contained in the comprehensive spending review later this month. The necessary legislation will be included in the Localism Bill, which is to be published this autumn.

The DCLG said primary legislation was needed, and the minister has ruled out a voluntary deal ahead of securing the powers in the Bill.

“In the period leading up to implementation of the new system, the overall approach for transfer proposals that have yet to be put to a tenant ballot will be a value for money and delivery test against the costs and benefits of the reformed system,” the Department added.

Shapps claimed that councils have been “left hamstrung in their efforts to meet the housing needs of their residents by a council housing finance system that is outdated and no longer fit for purpose”.

He argued that the new system would be more transparent and deliver less interference from Whitehall.

The minister added: “Subject to the Comprehensive Spending Review, we will offer councils the opportunity to keep the rents they collect and the receipts from any house or land sales. This is a key step to transfer powers to councils and communities, so they are free to improve their local services in a way that best meets the needs of local people.”

Cllr Gary Porter, chairman of the Local Government Association's housing and environment board, said: "We have campaigned hard for town halls to keep control of proceeds from council house rents and sales that could deliver tens of thousands of new homes over the next decade.

"Councils need to be given proper financial freedoms so that they can plan effectively for the long-term and get the best value for money while delivering the homes that people in their areas sorely need. This would also provide a huge boost to the economy, generating jobs and bolstering the struggling construction industry."

Porter said reform of the “outdated, inefficient” system of housing finance had long been talked about, but now was the time for action.

He warned that councils should not be made to inherit unreasonable levels of additional debt.