Futures Forum: A solution to our housing problems: allow councils to borrow to build
More of them are now going ahead:
More than a third of councils set up housing companies
More than a third of councils have set up or are considering setting up housing companies, extensive research by Inside Housing can reveal.
The research quantifies for the first time the extent of the march into private housebuilding by town halls, which has exploded in scale in recent months.
Freedom of Information Act requests to all councils in England, followed up by in-depth research, showed 98 out of 252 councils have established or are planning a private housebuilding company.
Only 18 months ago, just a handful of councils had established companies, with 36 councils deciding to set up housing companies within the last year.
Councils are using the companies to secure new sources of revenue amid government cuts, and also to build homes outside government-imposed borrowing restrictions.
Forty-two councils have published development plans, with 24 planning to build or acquire mostly private rented homes, six focusing on market sale and 12 delivering a mix including affordable rent or shared ownership.
Out of the councils who revealed how company income will be used, the majority said it would go into the council’s general fund. Some councils will use the income generated to tackle homelessness in their area.
Activity is focused on London and the South East with 44 of the councils in these two regions. In contrast, there are only two companies in the North East.
Development ambitions vary widely with some planning to build hundreds of homes a year, while others have only a handful in their sights.
More than a third of councils set up housing companies | News | Inside Housing
Questions would be:
> How transparent and open to public scrutiny are such schemes?
> How much of the revenues accrued will go to building new affordable housing - or will this simply be a cash-generating exercise for desperate local councils?
> What kind of conflicts of interest will there be if councils are entering the housing market?
Many of these issues are discussed by the Local Government Lawyer:
Local Government Lawyer - Council housing companies – another new build model
Following a cabinet meeting, the District Council announced last week its intention to establish its own LHC:
Company could play a key role in delivering new homes in districtEast Devon District Council is looking at setting up its own local housing company to play a more significant role in the local housing market and increase housing supply in the area to meet the demand for good quality housing.
The company, which would be wholly owned by the council, could play a key role in delivering new homes to the district’s growing population. It would be financed by the council and any profits would come back to the council.
Other key priorities for the new company would be to improve the quality of rented accommodation across the district, provide housing for sale and shared ownership, and set standards for good housing design and management in the local housing market.
A report setting out the outline business case for the proposal was approved by the council’s Cabinet yesterday (March 8).
The report outlines the purpose, legal position and operational considerations of running such a company. Among the benefits would be the opportunity to buy and let existing homes, including acquiring properties from developers, with the possibility of developing council-owned land or land bought through the open market. The company would be run as a business by a board of directors.
The report adds:
East Devon has a wealth of experience in housing and is one of the reducing number of councils in the country which still manages its own council housing stock of around 4,200 properties. This experience will assist in the operation of the company, although it is recognised that it will need to operate on commercial terms free from many of the local government restrictions.The Company can start small and build over time. Being entirely under the control of the council, we can operate at a pace that we are comfortable with, managing risk and exploring opportunity for development that are viable and provide a return on our investment.
Cllr Jill Elson, EDDC’s Portfolio holder for homes and communities, said:
The council will now prepare an initial business plan, identify the first projects and report back to the council.This presents a wonderful opportunity for the council to play a more active part in the local housing market. We have researched the proposal carefully and fully, looked at the risks and rewards, and decided that the local housing company model is a suitable model for the council to deliver its housing ambitions. We are seeing high levels of demand for housing in the area and see this as a way of increasing supply consistent with the government’s growth agenda.
9 March 2017 - East Devon District Council takes innovative step towards setting up local housing company - East Devon
Here is the full report from Officer John Golding, Strategic Lead – Housing, Health & Environment:
Agenda for CabinetWednesday, 8 March 2017 (page 45)
The purpose is not to provide affordable housing but to raise revenue:
The Chief Executive presented this report which set out the business case for setting up a Local Housing Company to be wholly owned by the Council with the purpose, amongst others, of providing housing in the general market (so outside of the Housing Revenue Account) and to generate a profit to provide income to the Council’s general fund.
EAST DEVON DISTRICT COUNCIL - Minutes of the meeting of Cabinet held at Knowle, Sidmouth on 8 March 2017