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Was HRA cap-scrapping really the biggest thing since Thatcher?

Was HRA cap-scrapping really the biggest thing since Thatcher?

🕔12.Nov 2018

Your starter for 10, as they say on University Challenge: What was recently described and by whom as “absolutely massive, the single biggest piece of news since Thatcher was in charge”? Chris Game asks whether one the Government’s latest policy announcements will really make that much difference to tackling the housing crisis. 

Well, it came in the PM’s Birmingham Conference speech, but wasn’t the fantasy bit about austerity being over. It was the more serious bit that followed, about how “we are scrapping the government cap restricting how much councils can borrow against their Housing Revenue Account (HRA) assets to fund new developments.”

And the excited chap, so happy that he “nearly cried”, was Lord Porter, Conservative Chair of the Local Government Association.  His personal elation was understandable, after campaigning for it throughout his nearly four-term of office, and also for what he suggested were its consequences.

“It means we can go and deliver half a million units over the course of the next Parliament – a hundred thousand units a year.”  He meant homes.  Whereupon, the Ministry of Housing, Communities and Local Government, whose job description doesn’t include raining on the PM’s parade, proceeded nevertheless to do just that, estimating a much more modest 10,000 additional homes a year.  Quite a difference.

I’m no housing expert, nor a great fan of the MHCLG, whose predecessors had been tasked at one time – by a Treasury-bullied New Labour Government – with getting supposedly managerially incapable local authorities out of low-cost social housing altogether.

Between them, they failed, with Birmingham playing a major role (of which, more below), but nevertheless 1.3 million council homes were transferred into housing association ownership and, as my lecture used to say, in half of all English local authority areas council housing became a thing of the past.

My personal first thought, therefore, on hearing Theresa May’s announcement was that, if you don’t own any council houses, you don’t have a Housing Revenue Account to borrow against anyway, and cap-scrapping is just an irrelevance.  Even without knowing the exact number of non-HRA councils, the Ministry’s estimate sounded the more realistic.

This week, however, we do know the exact number, thanks to, it must be said, some rather limited “research” in last Monday’s Independent – possibly a phone call to the Ministry – which “revealed that only 160 of the 326 councils in England with responsibility for housing have HRAs”.  49%, if you’re counting.

The Indy did, though, name names, noting that “some of the most deprived towns and cities with the greatest need for new homes, including Liverpool, Bolton and Wakefield, are among areas that will miss out.”

Which seemed particularly tough on Liverpool, whose Mayor, Joe Anderson, only recently announced plans to spend £50 million building initially 500 and eventually 10,000 new homes for the homeless, foster carers, large families, the elderly and people with disability through the council’s new ‘ethical housing company’, Foundations.

The new company was required because in the mid-2000s Liverpool’s cash-strapped council, like so many others before it, felt it had little chance of meeting the Government’s Decent Homes Standard without accessing the extra government funding that could come with transferring its remaining 15,000 housing stock to a housing association, Liverpool Mutual Homes. In the required ballot the tenants overwhelmingly agreed.

In Birmingham a comparable situation had played out very differently. In 2002 Birmingham’s 80,000 tenants, offered a similar but less appealing deal, had followed those in Dudley in decisively rejecting their Labour councils’ stock transfer proposals.

It was embarrassing all round – for Labour council leaders, following a costly promotional campaign; for former Perry Barr Labour MP and then housing minister, Lord Rooker; and for New Labour’s whole housing privatisation programme, for which Birmingham was an intended vanguard.

The two councils’ options, already limited, were now constrained by their knowledge of their tenants’ views.  Sandwell, whose tenants had also rejected a stock transfer option, created an Arm’s Length Management Organisation (ALMO – see table), whereby the council remained owners of the stock, but with all management transferred to Sandwell Homes.  Wolverhampton concluded a similar relationship with Wolverhampton Homes.

Both these councils naturally retain their HRAs, as do Birmingham and Dudley, who for differing reasons eventually chose the Local Authority Stock Retention option.

In the Metropolitan West Midlands, therefore, that leaves Coventry and Walsall councils. Their roughly 50,000 tenants have for some years now been in homes both owned and managed by housing associations, and so have nothing directly to celebrate, whatever the PM chooses to do to HRA borrowing caps.

The table summarising these various housing management arrangements also includes the MHCLG’s latest annual home completion figures, which, with the arguable exception of Sandwell, make rather depressing reading – arguable, because its 70 recorded completions, while maybe not sounding that great, constituted over a fifth of the total for all 36 metropolitan districts and were the 8th highest in the whole country.

31 of the met districts built precisely none between them, which obviously includes a lot – like Dudley, Solihull and Wolverhampton – that do still have HRAs.

How things have changed during my adult lifetime!  40 years ago, around the time of the aforementioned Margaret Thatcher becoming Prime Minister, over a quarter of a million homes were being built in England each year, well over a third by local authorities.

By the time she’d finished, in the early 1990s, the annual total had fallen to around 150,000, with local authorities’ steadily falling share about to drop below 5%.

When Labour left office in 2010, the overall total of homes completed was down to 125,000, with local authorities’ contribution under not 3%, but 0.3% – a grand national total of 360.

Since when, as the second table shows, there’s been a slightly-better-than-glacial improvement. The fact is, though, that it’s getting on for 40 years since English councils – including the half that no longer have even a Housing Revenue Account – built even a third the number of ‘units’ envisaged by Lord Porter for today’s councils.

I’ve never come near to building even a Cameron-sized shed, but I just can’t see how councils, several of the biggest of which are on the verge of bankruptcy and most struggling even to repair their potholed roads, are going to be able to recruit, equip, and above all pay for building on anything like this scale.

And that’s if they were actually able to borrow the money they may have imagined the PM was waving at them in the ICC Conference Hall.  Recently, though, the MHCLG made it clear why they’d been so quick to scale down expectations.

In a policy paper unambiguously entitled Geographical Targeting across 5 Programme Funds they explain that, of the several possible dimensions of a housing crisis, and therefore criteria for allocating funds from these five programmes, theirs will be lack of affordability, defined in terms of the current gap between house prices and average earnings.

“Areas of the highest affordability pressure (i.e. the greatest gap) will receive a minimum of 80% of the total funding from these programmes on average over the next five years.”

These were different programmes, of course, and criteria defined when the HRA borrowing cap was still very much in place. But, just in case you were wondering the areas of the country that would be prioritised by criteria of affordability pressure, Sky News produced a helpful little map – and surprise, surprise!

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