Councils will be unable to build some 20,000 homes because of a government decision to cut tenants’ rents.
That claim has come from the Association of Retained Council Housing (ARCH), which represents 162 English councils who between them own 1.6m homes.
In a paper for MPs examining the Welfare Reform and Work Bill, ARCH said the intended annual 1% reduction in social housing rents for four years starting in 2016-17 would leave councils without the money to build 20,000 homes in all.
It said it was “disappointing that the government is proposing to abandon the principles of self-financing for council housing”, given this had been agreed only three years ago with all party support.
Councils had followed this by creating business plans based on receiving £2.4bn of rental income that would now be lost.
ARCH said as a minimum the government should commit to restore rent increases of 1% above the consumer prices index after 2020-21.
“Many councils have already paused new build plans while they assess the impact of the government’s proposals; early indications are that no more than a small fraction of planned schemes will go ahead, principally on schemes where contracts have already been let”, ARCH said.
Councils across the political spectrum have found house building plans disrupted by the rent reduction.
Reading BC housing committee chair Richard Davies (Lab) said: “We are likely to go from building 1,000 homes over 30 years to building 50.
“We do not have the land so an additional factor is that we have to meet the cost of buying it.”
Conservative controlled Warwick DC had been hit by a combination of the rent reduction and the requirement to sell its most valuable vacant homes to pay for the new right-to-buy for housing association tenants, housing portfolio holder Peter Phillips said.
He said: “Warwick would have to sell approximately one third of its 5,500 council homes to fund the right-to-buy and as a high value area virtually every new build council house would also fall into the ‘high value’ category.”
This could affect the council’s planned building of 150 homes at Europa Way and delay a 300-homes regeneration scheme at Lillington for between five to 10 years, Cllr Phillips said.