Councils will be able to keep all their rental income and gain the freedom to manage their housing to meet local need under plans unveiled by the Government.
Announcing the outcome of the Review of Council Housing Finance, conducted by a wide range of housing experts and organisations, Housing Minister Mr Healey outlined his intention to dismantle the Housing Revenue Subsidy System, replacing it with a system that will give councils greater independence and freedom to manage their own housing resources.
The Housing Minister confirmed he would consult before the summer on proposals for councils to become self-financing and free to manage the needs of their housing stock as well as provide more efficient services for their tenants. He also said responses to the review showed strong support for a more devolved approach to financing council housing.
John Healey said:
"A fully self-financing locally devolved system cannot be implemented in a single step but I want to move as rapidly as possible to put these reforms in place and the consultation document will set out my proposed timetable.
"However, there are steps we can take without delay, so I am announcing that from today we will exclude all new build council housing from the HRA subsidy system - which means that councils will retain in full the rent and capital receipts from these homes.
"I want to provide more flexibility in finances and more transparency in the operation of the system. I want to devolve control from central to local government.
"In return, I want to increase local responsibility and accountability for long term planning, asset management, and for meeting the housing needs of local people. The current system makes this difficult to achieve."
A new advisory group with a wide ranging remit to look at future sources of private finance for housing has been established by the Homes and Communities Agency (HCA).
The Housing Finance Group, made up of industry experts and chaired by Nigel Hugill, the recent Executive Chairman of Lend Lease, will look at the future sources of private investment in new and existing housing. It will encompass both affordable and private housing.
Speaking at the Chartered Institute of Housing's annual conference, Sir Bob Kerslake, Chief Executive of the HCA said:
"Making the best use of private finance and, importantly, identifying new sources of investment, is crucial if we are to maintain activity and industry capacity throughout the downturn and beyond.
"The underlying need for producing new housing and improving existing stock hasn’t gone away, and I am delighted that the HCA will be able to call on individuals of this calibre to help us inform finance options in meeting that demand.
"Their focus will be housing specific but their findings and recommendations will have a knock-on effect on regeneration, which is intrinsically linked, and on individual neighbourhoods and residents across the country."
Nigel Hugill, chair of the Housing Finance Group, added:
"Public and private house building has tended to rely on comparatively narrow sources of funding in the UK. Those same sources can be expected to remain under pressure for some time.
"As a group, we will examine how the range can be broadened, in particular through the greater deployment of professional capital such as that proposed via the private rental initiative.
"Initial responses to that initiative give grounds for cautious optimism that there is institutional appetite to help extend funding sources across the residential spectrum."
The Housing Finance Group will review and explore the following areas:
Financing continued private sector development - including stimulating mechanisms which will allow returns on capital employed to reach a viable level for private sector developers, as well as exploring the entry of new players with private sector provision, including a longer-term investment in place building.
This area will build on the HCA’s Private Rental Sector Initiative and explore systems used by utility companies in assessing long-term investment.
Membership of the Group being announced at this stage are:
Further members may be added when the group is underway.
It is anticipated that the Group will meet twice monthly for a six month period initially before reporting on its findings and recommendations across the three areas.
