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Shapps – new financial deal for council housing

The Minister yesterday published details of the new financial deal for council housing – a key measure of the Localism Bill currently before Parliament. This includes a detailed description of how each council’s opening financial position will be determined and the process for implementing these reforms in April 2012. By providing councils with clarity on funding for the future they can now begin detailed preparations on how they plan to better meet the housing needs of their communities over the long term.

This new approach, developed in partnership with local government, will bring an end to the Housing Revenue Account subsidy system where councils were required to pay council rents to Whitehall which decided how to redistribute it meaning they had no certainty about future income, no ability to plan long term and little incentive to be more efficient.

The new self-financing approach puts councils firmly in control with the tools and incentives they need to manage their housing stock over the long term rather than on a year by year basis. This will be achieved by a one-off adjustment to each council’s housing debt after which councils will retain all the rental income they collect. And they will be free to make decisions about their housing assets without first having to get permission from Ministers in Whitehall.

By introducing a direct link between rents councils charge, the money they spend and the services they deliver tenants and local tax payers will be better able to hold their landlords to account. Councils will now for the first time be able to make information about how money is raised and spent publicly available in an easily accessible format. This will include how landlords are improving value for money to their tenants and local tax payers.

The deal includes an extra half a billion per year for councils to spend on their housing stock and extra £116 million funding for councils to pay for disabled adaptations to homes. In total, funding for management, maintenance, repairs and adaptations under the new approach will be 14 per cent higher than under the current subsidy system.

The Localism Bill, that begins its Committee Stage in the House of Commons today, 1 February 2011, includes these measures to repeal the existing subsidy system and replace it with powers for the Secretary of State to introduce self-financing.

Grant Shapps said:

"This deal brings to an end a centralised system which meant councils didn’t know what funding they would get for housing from one year to the next and were unable to take key decisions about their housing stock. It prevented them from delivering the best possible services for their tenants in the most efficient way.

"I am setting councils free to better meet the needs of their tenants. Today I am outlining these new freedoms as well as how each council’s opening financial position will be calculated. By giving them clarity on their future revenue and the freedom they have to decide what is best in their local area they can now start preparing for this council house revolution that will begin next year. They now have the tools and incentives to radically overhaul the housing services they provide and deliver better value for money.

"And by putting councils in control and making the decisions they take more transparent tenants and local tax payers will be better placed to hold their landlords to account."

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