Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more

A review of accounting rules is overdue

  • Comment

A specialist who designed someof the original HRA reforms argues for a rethink of the borrowing cap

A substantial part of the housing white paper deals with local authorities’ roles as strategic enabler and planner to help deliver more land and get developers to build more housing.

However, in addition to this there is a recognition in section three that many authorities are still landlords and that, along with housing associations, councils will have “an important role in delivering homes themselves”.

Since the reforms in 2012 some authorities have sought to build within their housing revenue account but increasingly the trend has been to set up companies or joint ventures to deliver additional new homes. The government has said it welcomes these innovations and wants to “address the issues that hold them back”.

It has also indicated that it “will be prepared to consider all the levers” at its disposal to support local bespoke deals with authorities wishing to build in high demand areas.

A bolder government strategy might have been to explore changes, post-Brexit, in the way we use the capacity of the local authority sector to deliver more homes

There is, in addition, the statement that following the centrally imposed rent reduction it will provide a new rent policy which will enable local authority and housing association landlords to borrow against future income.

This all sounds promising, but several controls (‘levers’) need to be addressed.

On top of the £8bn added to HRA debt as part of the 2012 settlement, authorities were subject to borrowing caps, the continuation of rent rebate subsidy limitation, and the changing rent rules. There has also been the new right-to-buy arrangements and the potential high value sales levy to contend with.

Despite the extra debt burden, local authorities’ HRA borrowing remains lower, per unit, than the housing association sector, and with 1.6 million tenanted dwellings still in council ownership, there is a strong asset base with which to take advantage of low interest rates and institutional investment.

It is true that some authorities are not using the current borrowing headroom and there is still a mentality among some to avoid debt, but a bolder government strategy might have been to explore changes, post-Brexit, in the way we use the capacity of the local authority sector to deliver more homes. A review of the arcane public sector accounting rules for housing is surely overdue.

Despite the government’s intentions to deliver more rented housing it also wants to provide the right-to-buy to new affordable tenants. Addressing this may yet be the biggest stumbling block to councils wanting to deliver some of the new homes that are needed.

David Hall, independent housing finance specialist

  • Comment

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions.

Links may be included in your comments but HTML is not permitted.