Treasury cash grab could jeopardise new council homes

Treasury plans to profit from right to buy sales will jeopardise the creation of thousands of new council homes, local authorities have warned.

The Local Government Association is calling on Peers to use the Localism Bill, which is currently going through the Committee Stage in the House of Lords, to reverse measures which see 75 per cent of the revenue from the sale of council homes handed over to the Treasury.

New LGA analysis shows that in the last six years £4.9 billion of revenue from the sale of council houses went to the Treasury, severely limiting the amount of money local authorities had to invest in new social housing.

The LGA is also calling for the rejection of plans which would strictly limit the amount of money councils can borrow to build new homes.

The LGA believes that Peers should step in to deliver a truly self-financing system for social housing by:
•Allowing local authorities to reinvest 100 per cent of receipts from the sale of council homes – not just 25 per cent.
•Removing the provision in the Localism Bill that would allow the Secretary of State to demand councils pay more money in future. The debt councils take on in return for self-financing should be a one-off amount. What is being proposed would be like buying a house on the condition the seller could demand more money at some point in the future.
•Scrapping Government-imposed limits on the amount councils can borrow for housing. In the Prudential Code, the sector already has a well-established and effective approach to managing borrowing.

Cllr Gary Porter, chairman of the Local Government Association's Housing and Environment Board, said:
"There is a significant shortage of council homes in the UK and reform of social housing finance is long overdue. Sadly a golden opportunity to create a truly self financing system is being missed. Peers should overturn Treasury plans to hoard the bulk of revenue from the sale of council homes. Instead, local authorities should be allowed to keep 100 per cent of the money to improve properties for current tenants and build new houses for those who need them. Failure to deliver could lead to thousands fewer council homes being built.

"The Government's movement toward a self financing model is undoubtedly good news. But we clearly need a more wholehearted pursuit of the principle from all departments. Similarly, placing restrictions on how much councils can borrow to build new houses runs contrary to the Government's broader intent of devolving greater freedom to local areas."