Housing minister Margaret Beckett has unveiled plans to allow councils to keep the rent and capital receipts from new homes they build.
The changes to the housing revenue account system are designed to empower councils to build a new generation of council homes.
Under the plans, outlined in a consultation paper, local authorities will be able to keep rent income from new housing they develop together with the capital receipts if those homes are subsequently sold through the right to buy.
The paper implements provisions in last year’s Housing Act.
“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.
Councils currently build only a few hundred homes a year, with the majority of 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 development funding on an equal footing with RSLs.