Cash deal for council landlords heralds self-financing future

Council landlords will be given access to Decent Homes funding under proposals announced by Housing Minister Grant Shapps so they can deal with a backlog of Decent Homes work. Some might say it’s better late than never, but it is all part of ushering in the brave new world of self-financing post-HRA reform – after that they’ll be on their own. Mark Cantrell reports

”There’s no money left,” has been the constant refrain from Government circles these days, as it has embarked on its deficit-busting austerity programme, but in some respects it’s a line that has resonated through the recent history of social housing.

Over the last 15 to 20 years, a lack of ready cash to invest in stock modernisation has been one of the major drivers behind large scale voluntary stock transfers. Time and again, tenants – understandably tired of living in homes that had seen little or no investment for years, even decades in the worst instances – turned away from councils. The lack of resources to bring homes up to a modern standard meant many councils could only say ‘there’s no money’. So, unsurprisingly, many tenants voted for housing associations and the greater access to Decent Homes funding that they enjoyed.

In some cases, the parting of the ways was wholeheartedly embraced by both councils and tenants for many reasons, not just the lack of resources; in others it was a reluctant separation born out of financial realities. Still some opted to stick with the council through thick or thin, whilst others opted for the arms length management model (ALMO) that was created in 2002. In the latter, it was able to draw upon Government cash for its Decent Homes work – but with a minimum of two stars needed from the Audit Commission, the hoops and hurdles needed to access the cash were greater than for their housing association counterparts.

Regardless of the relative disparities in ministerial largesse hitherto enjoyed by these different social landlords – itself a long-standing bone of contention – it is the Housing Revenue Account (HRA) that has long been a running sore for council landlords, whether they manage their stock directly or through an ALMO. The argument has long raged that the HRA’s negative subsidy system has effectively been impoverishing the council sector relative to its housing association peers.

Now, the HRA is being reformed at long last.

The Government has announced its plans to abolish the HRA in the Devolution and Localism Bill. Under the reformed system, council landlords will no longer be required to surrender rental income to the Treasury for redistribution, but will retain the income (though there was a sly twist in the Comprehensive Spending Review with its inclusion of a requirement of 100 per cent of all right to buy receipts to be handed over to the Exchequer in future). The income is expected to allow councils to plan for the long term and invest it in the maintenance of existing homes and build new ones, but in return for these greater freedoms councils will be expected to take on an additional debt. The new system is expected to come into effect from April 2012.

Meanwhile, a lot of work remains to be done on bringing properties up to the Decent Homes standard. Many councils lack the funding of course – all the more so in this era of cutbacks – so Housing Minister Grant Shapps has announced that council landlords will now be able to bid for Decent Homes funding to clear the backlog of work. The proposals have been launched with the invitation for comments through the Homes & Communities Agency (HCA).

“Previously tenants were in the worst homes when landlords were denied Decent Homes cash because they did not play by the previous Government’s rules. I believe that’s completely unfair – tenants are missing out on vital improvements to their homes through no fault of their own,” said Shapps.

“That’s why I am changing the system so from now on the areas that need the money most will get it. And it’s why despite the steps the Government is taking to tackle the record deficit, we’ve set aside over £2 billion to make sure these homes are brought up to scratch.”

The HCA expects 92 per cent of social housing will meet the Decent Homes standard by the end of this year – that is they will be warm, weatherproof and have “reasonably modern facilities”. The Comprehensive Spending Review (CSR) promised £2.1 billion to address the backlog of work. Of this, £1.6 billion will be allocated to those councils that need it most, with the remaining £500 million available in gap funding for housing associations.

“The reformed HRA should give landlords sufficient resources to maintain homes at the Decent Homes Standard (DHS). Some landlords, however, have a backlog of homes, which, at the present time, do not meet the Standard and hence require additional capital works,” says the proposal document released through the HCA.

“We recognise that the HRA reform settlement does not, in itself, provide capital resources to deal with this backlog of works, and that substantial quantities of such stock cannot form part of a long term business plan without a route to bring it to decency. Additional funding is therefore required by these authorities.

“In making capital funding available to council landlords, the Government’s intention is to enable those councils to achieve a sustainable business plan within a reformed HRA system.”

According to a CLG spokesperson, “the changes to the allocation process are part of the Government’s commitment to fairness, ensuring that following the tough spending review, money is directed towards frontline services and protecting the most vulnerable people in society”.

The spokesperson added: “Ministers believe the previous system for allocating money was overly bureaucratic, and meant councils spent too much time and expense jumping through hoops, rather than making improvements to social homes. The money would now be allocated to councils who showed they could tackle a significant backlog of homes that need improving, rather than on a basis of a particular organisational structure or general performance criteria.”

Council landlords have given the proposals a cautious welcome thus far, according to the Association of Retained Council Housing (ARCH), though it will be submitting its views in full to the consultation.

“Questions over definitions, timescales and the allocation formulae need to be clarified,” said Brian Reilly, ARCH executive board member and deputy director of housing at the London Borough of Wandsworth. “Our initial view is that we are pleased in principle that the Government has recognised the backlog that remains and is aiming to bring homes up to scratch in preparation for a new finance system. There are concerns, however, that the sums involved may not be sufficient to meet high levels of need. Although there are good reasons for some authorities not being able to meet the standard, others might argue that they are now missing out as a result of having managed their resources prudently and met targets.”

Doubtless, the money is welcome by councils – and especially tenants – waiting for the means to bring homes up to a decent standard, but given the era of cutbacks and austerity, this snippet of good news may for many be too little too late.