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Even widespread reforms might not return councils' housebuilding glory days

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It has been five years since self-financing for housing was first introduced for councils with the intention that they would be able to access more funding to invest in housebuilding.

While LGC analysis has found councils have built something approaching double the number of homes in the past five years than they did in the previous five-year period – 7,360 compared with 4,180 – this is not a significant surge in the grand scheme of things. It’s certainly a far cry from almost 50 years ago when 170,000 of the 400,000-plus homes built in 1968 were constructed by councils.

Woking housing development

Even widespread reforms might not return councils’ housebuilding glory days

Woking BC is playing a major role in local housebuilding

Last year, Housing & Finance Institute chief executive Natalie Elphicke said councils were doing a “fantastic job” contributing towards meeting the country’s housing need but added they “need to do more”.

Only about 100 councils still hold housing stock, according to the Association of Retained Council Housing. In addition to this, government policies, particularly the right-to-buy, have also had a huge impact on limiting the role of councils.

In the year to April 2016 there was a 1.9% decrease in the number of homes councils owned, according to Office for National Statistics data. The fall to 1.61 million homes has been largely attributed to right-to-buy sales in recent years.

Simon Smith, associate at the Housing Quality Network – which provides advice, support and training to councils, Almos, housing associations and other housing providers – said the right-to-buy combined with “continual interference in rent policy” and welfare reform had created “uncertainty” which had had a particular impact on larger developments.

Yet more housing is sorely needed.

Despite a so-called housing crisis gripping the country, policies outlining how the main parties would tackle it were largely overlooked during the general election campaign as media coverage largely concentrated on Brexit, the NHS, social care, Theresa May’s fear of the public and Diane Abbott’s mathematical skills.

There was, however, consensus among the main parties, even the Conservatives, that councils have a major role if the country is to build the homes it needs.

Last year, just under 148,000 homes were built by developers, housing associations, and councils – a far cry from the 250,000 homes a year the Conservatives are striving for by 2020. Of those, about 1% were constructed by local authorities. LGC analysis found councils have contributed a similar proportion of homes in each of the past five years.

Some councils, however, are attempting to breathe life into a stagnant housing market.

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LGC analysis of Department for Communities & Local Government data shows Conservative-controlled Woking BC has built more than a third of the total number of properties constructed in its area in the past two years – most of which have been affordable and social housing. Some of the homes have been delivered through the council’s housing company. An LGC investigation last year revealed a huge boom in the number of local authorities setting up such entities.

Arch’s policy adviser Matthew Warburton estimates about a third of councils now have one of these, and added: “Although these have yet to bear much fruit there is every prospect that numbers will increase over the next few years”.

As the homes these companies delivered are generally for sale or market rent, it is one way councils have avoided right-to-buy rules from further plundering stock.

Writing for LGC, Woking leader David Bittleston (Con) urges his own party nationally to take a look at the right-to-buy system so it can be “improved”.

The fact the proposed national rollout of the extended right-to-buy for housing association tenants, funded through the sale of higher value council homes, was left out of the Conservative manifesto offers a glimmer of hope the government is listening, although the Chartered Institute of Housing has previously warned the policy might not have completely gone away.

There’s no doubt the Conservative party has significantly changed its tone, though – first evidenced in the housing white paper which recognised councils had a role to play in building the number of homes required.

The Tory manifesto then referenced negotiating social housing deals with councils, whereby a proportion of the properties built through these deals must be sold after 10 to 15 years with the tenant receiving the first right-to-buy on that property. Money raised from sales would be reinvested in building more social housing. However, questions have been asked about the capacity of those agreements to deliver many homes without further government funding beyond the £1.4bn being made available.

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Housing experts say more needs to be done if councils are to make significant housing contributions, including ministers revisiting housing revenue account caps, the 1% rent reduction policy, and the right-to-buy.

It would also help, the Local Government Association has argued, if councils were given power to charge developers full council tax rates on every unbuilt property after the original planning permission expires. Research the association commissioned last year found more than 475,500 houses with planning permission had not yet been built.

However, Mr Smith warned there is “no guarantee that local authorities will build again” even with widespread reforms, largely due to austerity and the limited returns social housing provides when the right-to-buy is factored in.

“Despite the local economic boost housebuilding can provide and the pressing need for more affordable homes across the country, a council will ultimately base its decision on its ability to fund it, its willingness to commit available funds, or whether the numbers stack up financially,” said Mr Smith.

The Biggest Council House Builders: council homes as a proportion of the overall number of houses built in each area 2015-16 to 2016-17 by Charlotte Thomas
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