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Matthew Warburton: Election result puts plans to boost building in doubt

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The shock result of last week’s general election puts the future of government housing policy in some doubt.

Gavin Barwell, the minister responsible for February’s White Paper, lost his seat and whoever takes his place, the government’s attention is likely to be focused in the short-term on securing majority support for a Queen’s Speech and a Brexit strategy rather than moving forward across the full span of their manifesto commitments.

It would be unfortunate if the result were a loss of focus on housing policy because there is a consensus between Conservative and Labour that councils should be asked to take on a bigger role in housebuilding than they have played for some decades.

Both their manifestos include commitments to a big increase in council housebuilding, albeit with rather different objectives and emphasis. The key difference is the proportion of new council-built homes that is likely to be genuinely affordable to people on low incomes. 

Over the past few years, stock-owning councils have shown a real appetite to get back involved in housebuilding. Although the potential created by the self-financing settlement of 2012 was quickly frustrated by government changes to rent policy and the right-to-buy, councils quickly responded by looking to build outside the housing revenue account.

Over a third have set up local housing companies to build or acquire new homes, and although these have yet to bear much fruit there is every prospect that numbers will increase over the next few years. However, it is far easier for councils to use local housing companies to build homes for sale or market rent than for social rents comparable to those paid by traditional council tenants.

The economics of building off-HRA mean that affordable housing – of all kinds – has to be funded through planning gain or cross-subsidy from the sale or rent of market housing. The last government was always suspicious that councils might be working outside the HRA to avoid giving new tenants the right-to-buy. So February’s white paper included the expectation that local housing companies should offer affordable housing tenants opportunities to access home ownership broadly equivalent to those enjoyed by council tenants.

The Conservative manifesto proposal for council housing deals gives a better idea of what this might look like – with 15 year tenancies at “affordable” rents followed by the opportunity to buy at a discount, although much of the important detail has yet to be spelt out. The number of homes to be delivered through such deals is not specified, but it is clear that the Conservatives do see councils as a key agents in delivering their plan to raise house-building to 250,000 homes a year by 2020. It is equally clear that the total output of new homes is more important to them than the precise mix of market and affordable homes.

What worries councils is that fact that it is much less clear how far the Conservatives are willing to remove the obstacles to building in the HRA for which they were responsible, from debt caps to rent reductions to high value asset levies.

The white paper recognised a continuing if relatively small role for traditional council housebuilding, and committed to discuss rents policy after 2020. The Conservative manifesto is perhaps significantly silent on the extension of right-to-buy to housing association tenants and the means of financing it.

If councils are to build more homes in the HRA – whether for social or affordable rents – they need early decisions on all these points. Gavin Barwell understood this. Let us hope his successor gets the message soon.

Matthew Warburton, policy adviser, Association of Retained Council Housing

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