Minister promises greater freedom for councils to trade housing assets

Local authorities could be handed greater freedom to trade their social housing assets under a Department for Communities and Local Government consultation launched today.

If implemented, the proposals would mean that councils no longer have to seek permission from a senior government minister in every case where they dispose of housing land at market value.

Local authorities have powers under Part II of the Housing Act 1985 to dispose of council housing assets, but can use these powers only with the consent of the Secretary of State.

Section 34 of the Act permits the Secretary of State to grant consent generally. This means that where certain pre-conditions are met, the local authority is free to dispose without first having to obtain that consent.

The current General Consents issued under section 32 of the 1985 Act – which were issued in 2005 – prescribe a limited number of situations where specific consent is not required either to dispose at market value or to dispose at a discount.

“We feel that the current consent regime now runs counter to the principles of localism and decentralisation and will be less relevant under self-finacing,” the consultation paper says.

Under the proposed changes, local authorities would only be required to obtain the Secretary of State’s consent to dispose of housing land at market value where:

• the disposal results in a tenant of the council becoming the tenant of a private landlord. The DCLG said the role of the Secretary of State in having the final say in these cases provided comfort to tenants, and that there were no plans to change this situation
• the disposal is of a dwelling to a wholly owned subsidiary of the local authority. “The Secretary of State wishes to ensure that the viability of the Housing Revenue Account business (and the controls on housing borrow) is not compromised by moving assets out of the Housing Revenue Account whilst retaining arms’ length ownership,” the DCLG said. “Local authorities will have to demonstrate to the Secretary of State that there is a sound business case for any such disposals.”

The government said it would also streamline the regulations – the Local Authorities (Capital Finance and Accounting) (England) Regulations 2003 (as amended) – that govern use of the receipt arising from the disposal of council housing assets.

“In addition to simplifying the regulations, the Government is clarifying in what circumstances the local authority must surrender 75% of the receipt from a disposal to central Government,” the DCLG said.

Its proposal is for this to be the case “when the sale is made to existing (or recent) council tenants”.

Receipts from sales to other individuals for owner-occupation may be retained provided they are used for specified purposes. These purposes will include spending on affordable housing and regeneration, and repaying housing debt connected to the particular asset being sold.

“Under the self-financing settlement, each local housing authority will take on a level of debt associated with each individual house or flat in its possession,” the DCLG said.

“It is therefore essential that when a local authority disposes of houses and flats it must have the option of clearing the debt associated with it. This will enable councils to maintain healthy balance sheets for their social housing, which is vital for continued investment in new housing.”

Housing Minister Grant Shapps said: "For years councils have been hamstrung in their attempts to use social housing to its maximum effect, with a lazy consensus amongst politicians trapping one of our most valuable resources in a system that helps far fewer people than it should.

"If councils want to use their assets to improve the availability of housing for their local community, it is ridiculous that they are forced to ask a senior Government Minister for permission in every case. That's why I am proposing greater freedom for councils to enable the judicious sale of assets.

"I also want to end the complex regulations that make it difficult for councils to boost local investment in new housing. Our proposals will streamline the rules so councils can recycle more receipts from these sales into improving the local availability of affordable homes. These changes will make the system fairer - councils will now be able to make decisions that genuinely meet the needs of local people, and the changes will not any affect any existing tenants."

The DCLG said the proposals would speed up the process of selling houses but not result in a significant increase in sales, and local authorities would be required to spend the receipts on housing or regeneration. The arrangements for Right to Buy will remain unaffected.

The consultation Streamlining council housing asset management: Disposals and use of receipts can be viewed here. The deadline for responses is 17 November 2011.

Philip Hoult