WIREDGOV

Healey overhauls council housing finance system

News Release issued by the COI News Distribution Service on 21 July 2009

Housing Minister John Healey today unveiled plans to dismantle the current council housing finance system and replace it with a clearer, more transparent system that puts councils firmly in control and better able to respond to the needs of local tenants and residents.

Mr Healey also challenged councils to work with him and his ministerial colleagues to make these radical reforms through detailed work together. There has been wide and strong support for local self financing, particularly in local government.

Today’s consultation on reforming the current Housing Revenue Account (HRA) subsidy system was published alongside radical new proposals to strengthen local democracy announced by Communities Secretary John Denham.

The proposals for a devolved self-financing alternative to the current system removes the need to redistribute revenue nationally whilst continuing to ensure that all councils have sufficient resources. Councils will finance their own business from their own rents and revenues, in exchange for a one-off allocation of housing debt.

By freeing councils from the annual funding decisions in the current system, councils will be able to plan long term and improve the quality of services to their tenants. It will give councils greater capacity and freedom to respond to local needs and, in doing so, increase their responsibility and accountability to local tenants and residents.

Councils currently provide around 2 million rented homes and, alongside, housing associations they provide decent, secure and affordable accommodation for over 8 million people.

Today’s proposals follow last month’s Housing Pledge by the Prime Minister – an extra £1.5 billion to boost the number of new homes for people to rent or buy to 110,000 in the next two years: this is a fourfold increase in plans for new council homes. The consultation seeks views on a wide range of council housing issues including the following:

• Dismantling the current Housing Revenue subsidy system and replacing it with a fairer, more transparent system that will give councils greater independence and freedom to manage their housing resources.

• Increasing local responsibility and accountability for councils, giving them the opportunity to think and act more strategically in the longer term when managing their assets and meeting the housing needs of local people.

• Allowing local councils to keep all the rental income from tenants as well as any proceeds from Right to Buy sales that can be reinvested locally.

John Healey said:

“Over £33 billion has been invested in improving council and housing association homes since 1997 and by the end of next year we expect 95% of these homes to be warm and weather-proof. If we are to maintain these improvements for the long term then it is imperative to reform the system which finances council housing.

“The proposals I am publishing today will free councils from annual funding decisions so they can plan long term and improve the management of their homes, secure greater efficiencies and improve the quality of services to their tenants.

“The challenge now is whether local government is ready to work with me and Ministerial colleagues to make these radical reforms through detailed work together.”

Under the proposals, councils will be freed from the national Housing Revenue Account subsidy system which redistributes resources between local authorities based on need. This system has allowed little incentive or freedom for councils to plan long term for housing need in their area or to deliver more efficient services.

Under the proposed self-financing system, councils will be freed from central government intervention; they will be able to generate sufficient income to sustain their stock; and will have to produce thirty year business plans. The consultation also proposes continuation of the Decent Homes Standard.

With greater freedom comes greater responsibility, so the TSA will in future play a major role in ensuring that local authorities are seeking efficiency and value for money in their service delivery, providing greater openness on costs, and making sure that every penny of tenants’ and taxpayers’ money is spent well.

Notes to Editors

Reform of Council Housing Finance is published today and can be found at: http://www.communities.gov.uk/publications/housing/councilhousingconsultation

Contacts:

Communities Local Government
NDS.CLG@coi.gsi.gov.uk

Sarah Southerton
Phone: 020 7944 3042 Out of hours 020 7944 5945
press.office@communities.gsi.gov.uk