Housing plan fails to deliver

Key role for councils over housing

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Hopes that ministers would hand councils power to offer competitive mortgages have failed to materialise in the government's housing market rescue plan.

The government overlooked calls from councils to relax lending restrictions so they can offer mortgages on more favourable terms than banks, but officials refused to rule out such a move in future.

Asked about the possibility of councils offering mortgages, director general of housing at the Department for Communities & Local Government Richard McCarthy said: "We are not making a policy statement today about encouraging more local authorities to do that, but we recognise and appreciate that local authorities have [looked into it]."

But Local Government Association housing spokesman, Paul Bettison (Con), said: "The bold move by the government would have been to look at allowing councils to lend competitive mortgages and borrow more money against their assets."

London Councils executive member for housing, Jamie Carswell (Lab), said: "We think councils can go even further than the plans outlined by government - through our own flexible mortgage rescue schemes, buying repossessed properties and offering mortgages."

The proposals, unveiled by communities secretary Hazel Blears, saw £1bn of existing affordable housing money reallocated.

Councils will play a central role in one of the new measures - a mortgage rescue scheme which will see £300m invested to bail out 9,000 householders.

Councils will be able to determine which homeowners receive support, including going into shared ownership with a registered social landlord (RSL).

The government has also brought forward £400m for building affordable homes. For the first time, councils that continue to directly manage their stock will be able to apply for this grant to build social housing, alongside RSLs.

But the LGA said the 20,000 households that would be helped out by the package constituted a small percentage of the four million people currently on the waiting list for a council house.