In a consultation, housing minister Margaret Beckett unveiled plans to allow councils to keep all the rental income from any homes they build, along with the receipts from any house sold through right-to-buy.
The changes would amount to the first steps towards the dismantling of a fundamental principle of the much-maligned housing revenue account, giving councils greater control over housing revenue and capital streams.
“We are determined to keep house building going in the current climate, as the long-term need for more homes is not going to disappear,” Ms Beckett said. “These new freedoms will encourage councils to play a bigger role in driving forward the delivery of new affordable homes for families in housing need.”
The minister also urged interested councils to discuss their plans with the Homes & Communities Agency .
The proposals were given a cautious welcome by the Local Government Association . Its programme director for environment and planning, Martin Wheatley , said the announcement was in line with discussions between the association’s chairman Margaret Eaton (Con) and Ms Beckett.
“We would strongly welcome anything that makes it possible for councils to have more flexibility on the capital and revenue side of housing finance,” Mr Wheatley continued.
“But it is always possible for the rhetoric to be right but closer inspection to show a different picture.”
Councils build only a few hundred homes a year, with most new social homes built by registered social landlords (RSLs).
The government recently announced it would invite councils to bid for a share of capital grants to subsidise the cost of new housing.
The new financial rules would make it possible for councils to compete for this funding on an equal footing with RSLs.
The Department for Communities & Local Government’s review of council housing finance is looking at all aspects of finance including the HRA system and will report to ministers later this year.
Alan Walter, tenant chair of lobby group Defend Council Housing , said: “Tenants and 1.6 million households on council housing waiting lists will welcome the decision by government.”