Reform housing system to build 300,000 new homes

LGA press release - 16 June 2009

More than 300,000 new homes could be built, providing a £72.5 billion boost to the economy over ten years, through root and branch reform of the housing finance system, a new report published today has revealed.

The Local Government Association, which represents more than 350 councils in England, will today (Tuesday 16 June) launch a major new housing campaign to give councils the freedom to build scores of new affordable homes and regenerate neighbourhoods across the country.

Demand for social housing is being fuelled by the recession. A survey of council leaders conducted by the LGA found that 57 per cent of authorities are seeing more people in need of social housing and 31 per cent expect to.

The LGA predicts that five million people could be on a social housing waiting list by 2011. In 2007, councils built less than 400 new houses. The Places You Want to Live campaign, which will be launched today (Tuesday) at the Chartered Institute of Housing annual conference in Harrogate, calls for:

• Councils to be able to retain rents and the proceeds of any council house sales
• Councils to have the financial independence to invest in their housing stock and stimulate the local economy
• Historic ‘notional debt’ – which councils are currently spending £1.3 billion a year servicing – to be cancelled
• Councils to have the same freedom as other social housing providers to borrow money to invest in new homes
• The government to stop setting tenants’ rent and allow them to reflect local circumstances

All the money councils collect in rent is currently transferred to central government coffers and either re-distributed to other parts of the country or spent on other projects. There is no guarantee the money is spent on housing. Analysis by the LGA has shown that if councils could retain this money they could, in just the current financial year, make 850,000 homes more energy efficient and save householders £160 on their energy bills.

Around £216 million of council tenant’s rent will be retained by the Treasury in the current financial year – a figure that will rise to almost £1 billion by 2022/23. The LGA argues the building, repair and maintenance of council housing is being starved of cash. It wants the proceeds of tenants’ rent to be retained locally and spent on improving housing for local people.

Up to 90,000 additional affordable homes could be built by councils over the next five years if the system was reformed. Over a 10 year period, the extra income from retaining tenants’ rent would allow an extra 139,000 social houses to be built. If councils were also released from their historic debt and allowed to borrow against their assets this figure could rise to 309,000 – providing an enormous boost to the housing industry and the wider economy.

Cllr Margaret Eaton, Chairman of the Local Government Association, will tell the CIH conference today:

“Entire neighbourhoods could be transformed if councils were able to keep the rent they collect and the proceeds of council house sales. Thousands of homes could be built, improved or made more energy efficient if central government stopped taking this money.

“As the recession starts to bite and more and more people struggle to find a roof over the heads, it is more important than ever to give town halls more powers over housing. Councils want to create places where people are proud to live. Allowing councils to spend the rent they collect and the proceeds from council house sales would be a huge boost to the economy.

“The rent that the tenants pay to their council should be spent on their housing needs and those of local people. None of this money should be sitting in a Treasury vault. Councils with greater difficulties must not be left unsupported and may need additional funding, but this should not be at the expense of tenants in other parts of the country.

“Allowing councils to retain their rents would give tenants a real say over how their money is spent. It is ludicrous that someone living in Leicester could have their rent spent on housing in Leeds. Financial independence for local councils and local people will help create the places that people want to live in.”

ends

NOTES TO EDITOR:

Figures on local authority waiting lists by council area are available from the most recent Communities and Local Government data:

http://www.communities.gov.uk/documents/housing/xls/table600.xls

Author: LGA Media Office
Contact: LGA Media Office, Tel: 020 7664 3333