LGA fears Treasury "interference" could scupper new housing

Interference from the Treasury is undermining the ability of councils to build new housing, the Local Government Association has warned.

The LGA said the Localism Bill failed to go far enough when it comes to giving local authorities control of their own housing stock.

The association said councils would still be made to give 75% of the money raised from the sale of council houses, through the Right to Buy, to the Treasury.

This could mean up to 100,000 fewer new council houses could be built, it claimed. The ability of councils to improve existing housing stock would also be hampered.

The LGA called for a truly self-financing system for social housing where:

• local authorities were allowed to reinvest 100% of receipts from the sale of council homes – not just 25%
• the provision in the Localism Bill that would allow the Secretary of State to demand councils pay more money in future is removed
• the debt councils take on in return for self-financing is 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,” the LGA claimed
• Government-imposed limits on the amount councils can borrow for housing would be scrapped. The LGA said that the Prudential Code already provided a well-established and effective approach to managing borrowing.

Cllr Gary Porter, chairman of the LGA’s housing and environment board, said: "Reform of housing finance is long overdue. Councils must be able to retain their rents so they have then money to improve properties for current tenants and build new houses for those who need them. Self-financing – if done properly – would achieve this aim, but it would appear that the Treasury isn’t willing to let go.

"Withholding from councils the majority of the money raised from Right to Buy sales will jeopardise the building of 100,000 new homes. This comes at a time when there is a dire need for new social housing.”

Cllr Porter welcomed the government’s commitment to moving towards a self-financing system, but warned that some of the proposals in the Localism Bill ran counter to that principle.

"You can’t talk about supporting localism but then impose limits on local borrowing or take local revenue away after both sides have agreed the settlement figure,” he added.