LGA urges government not to weigh councils down with debt in housing overhaul

Local authorities should not be made to pay an unreasonable price to buy the council houses in their area back from the government, the Local Government Association has demanded.

In a report called Council Housing: Efficient, Effective, Local, the LGA also said the government should:

• Scrap proposals to place a new cap on councils’ ability to borrow money. “Existing rules are sufficient to ensure town halls are financially prudent”
• Continue to fund the backlog of housing maintenance repairs, which is estimated at £6bn.

Publication of the LGA’s report comes after Housing Minister Grant Shapps last week announced that local authorities would be allowed to keep all the rent and sales receipts they receive from council housing.

The minister said councils would have to take on additional debt in return for these greater financial freedoms.

Cllr Gary Porter, chairman of the LGA’s housing and environment board, described the government’s commitment to overhauling the housing revenue account system as a tremendous breakthrough.

He said: “For the past three years the LGA has been lobbying for councils to be freed to invest the money they collect in rent in improving properties providing new homes for those that need it. Devolving this power to councils is vital to turning around a house-building slump which saw has seen just a few hundred new council homes built per year recently.

“At the moment, the majority of rent tenants pay gets funnelled off by Whitehall either to be spent in other parts of the country, or to sit in a Treasury vault.

“This underfunded system has left councils guessing from one year to the next how much of the money will be given back to them and prevented them from being able to plan effectively for the long term.”

The LGA estimated that the freedoms could see investment in up to 30,000 new council homes over the next five years, and – if there is an upturn in the economy – 100,000 over the next decade. This would boost the economy and provide jobs as well as reduce waiting lists and housing benefit bills, it added.

Cllr Porter said: “Councils were forced into the housing revenue account subsidy system and should not be made to pay an unreasonable price to get out of it.

"Now, more than ever, it is vital that town halls are finally freedom unnecessary burdens and counterproductive restrictions so they can get on with the job of meeting the housing needs of the people they serve."