How to get councils building homes again

Once again, the onus is back on local authorities to build social housing. Former director of housing Ken Jones looks at the obstacles that councils will have to overcome to make a success of it.

Here’s a prediction, over the next few months a government minister at MHCLG will criticise councils for not getting on with building enough new homes.

She or he will say, ‘we gave councils what they wanted, we removed the borrowing caps from their Housing Revenue Accounts, why aren’t they building’.

The background is likely to be a turndown in housing starts across all sectors; pointing a finger at recalcitrant town and city halls will be a handy piece of deflection.

In fact, there are signs that councils are gearing up. From my experience, I see that there is real ambition on their part to build truly affordable homes for local people.

But house building at volume isn’t like flicking a light switch. Whilst it’s true that scrapping borrowing restrictions is encouraging and a precondition to seeing a major rise in council house building, I believe there are three other impediments for councils that need to be tackled.

Right to Buy

The first is the continuation of the Right to Buy with current discount levels.

Some council leaders say why should we incur debt to build new homes if they are then sold at massively discounted prices.

Although there is a build cost threshold to mitigate the loss to the council, RTB remains a significant disincentive to build the homes that are desperately needed.

Governments in Scotland and Wales have abandoned RTB, it would be a boost if the government at Westminster devolved decisions on the future of RTB to England’s local government.

Sea change for council housing

The second impediment is uncertainty over government policy.

2012 marked a sea change for council housing with the introduction of self-financing for council housing.

This was crucial, for the first time councils could plan their housing businesses on a long term basis, the level of debt taken on was set, rent policy was fixed, RTB discounts were known and because the coalition government had effectively adopted the previous Labour government’s policy from their Green Paper, ‘Council Housing: a real future’, there looked to be certainty of future policy.

With these conditions in place, councils with housing stock signed off on the government’s deal, knowing they can now confidently set their housing investment plans.

Reading this you just know there’s a hitch. I remember a Sunday morning in late September 2014 watching David Cameron on one of the politics shows.

He announced his government was to massively increase the discounts for RTB sales, I nearly choked on my breakfast. There had been no discussion let alone consultation with local government. The consequence of this was an enormous increase in council house sales with negative impacts for business plans.

The next setback for social housing came a year later, when out of the blue the Chancellor ripped up the social rent policy upon which business plans were predicated. Instead of modest increases, rent cuts of 1% per annum were put in place for five years.

These actions took hundreds of millions from investment in new homes and improvements to existing social housing. It also dented the confidence and trust of local government.

Lack of experience

The third impediment facing councils that want to start home building programmes is the lack of experience, skills and self-confidence.

This isn’t surprising, councils have in most part been out of the business since the late 1970s, the role of building affordable homes was given to housing associations.

Building teams with the necessary skills takes time; maybe the answer is for councils to seek new and different partnerships with housing associations and other developers that have these skills and experience.

This means not disposing of their land assets but instead buying in the expertise alongside building their own capacity. If councils are to get back in the game long term they need to develop the tools to do so.

Deal with those obstacles and we’ll see local government fully play its part in tackling the nation’s housing crisis.