With more than 1.2 million households in this country on council housing waiting lists, it is unsurprising that a widespread consensus has emerged in recent years that local government has a critical role in the delivery of social housing.
Yet there have been notable changes in councils' approach to that role over time, ranging from acting as facilitators, enablers, and partners with the private sector, to the establishment of housing companies.
In recent years Local Partnerships has worked with a growing number of councils who are interested in reopening Housing Revenue Accounts (HRA) and delivering homes directly themselves through that mechanism. Is this ‘back to the future' approach likely to become more popular in future?
‘How do you go about reopening the HRA?' is a question the Place team at Local Partnerships is often asked. On one level – legally and practically – this is an easy question to answer: the council simply needs to make arrangements to open up a separate, ringfenced account for the purposes of developing and managing homes in its ownership. While the mechanics of reopening an HRA are simple, councils are likely to face greater challenges in interpreting and applying the rules relating to HRAs, not least where the corporate memories around HRA ringfences may have been lost many years ago, as councils transferred their housing stock. Councils should not embark on this process lightly, nor without specialised expertise.
Yet this is probably not the biggest question for councils to ask themselves; that is surely ‘Should we be reopening an HRA?'. It is my view that the sector should learn lessons from the recent past, when too many councils embarked on establishing their own housing companies before really asking that question of themselves. In recent years, we have helped many councils who are dealing with the consequences of those decisions.
Certainly, there are potential benefits arising from reopening an HRA. Primarily, these benefits are around the opportunity for the council to intervene directly, and at scale, in providing more social housing in its area. It's important to bear in mind that councils are only permitted to own up to 199 properties before being compelled to reopen an HRA. In many areas, with the changing shape of the Registered Provider (RP) sector meaning that stock transfer RPs have merged into larger, more commercial, but less local, entities, elected members are increasingly of the view that it falls to local government to fill that gap.
Faced with widespread housing need, it is little wonder that this approach is increasingly appealing to many councils.
As well as the critical objective of meeting local housing need, reopening an HRA may also have other advantages. These include the benefits of more direct control over developing and delivering business plans for social housing; we have seen too many councils establish housing companies only to encounter difficulties in oversight and scrutiny of their own companies.
However, before embarking on this approach, councils also need to recognise the challenges and obligations that come with re-opening an HRA. As well as providing great potential to address housing need, such a decision will bring significant challenges.
Reopening an HRA will involve a skills and capacity challenge, as councils work to understand and apply HRA rules (not always a simple task). At least initially, one of the key capacity challenges will be around financial and business planning expertise, as councils work to develop a viable HRA business plan. Councils will need to consider whether any land or existing homes, currently within the General Fund, should be transferred to the HRA. If so, councils will need to consider the allocation of costs and revenue on everything from grass cutting to garages. A multitude of policies will also need to be prepared if they do not already exist, covering areas from allocations to voids.
Councils looking to reopen an HRA will also face challenges familiar to those who have established housing companies. Is there a pipeline of land they own or can control which can be used for housing development? Are these sites likely to generate viable schemes? What is the planning position? To what specifications should homes be built? How can a supply chain be procured or developed?
As with any approach under consideration, councils should conduct a rigorous options appraisal of potential interventions in the local housing market. This involves having a clear understanding of objectives (and their relative importance to the council) and assessing the multitude of options open to the council against them.
Options open to councils do not just include direct delivery, through the HRA or a housing company. They also include leveraging funds such as social impact funds or private finance, partnerships with RPs, or the private or third sector, acquisition and management of existing stock (potentially through the HRA), or site disposals, potentially through a development agreement that includes social housing obligations over and above planning policy.
There is an array of levers in front of councils, and understanding which combination of levers that councils should pull, can be complex – yet highly rewarding. In the right local context, reopening an HRA may indeed be part of the solution.
In other words, the answer to the question which councils should be asking themselves – ‘should we be reopening an HRA' – will depend on local context and circumstances, rather than a preconceived policy position. If current trends continue, it will be a question that the Place team at Local Partnerships will be helping more and more councils to answer in the years to come.
Martin Walker is Senior Director at Local Partnerships
@LP_localgov
For an informal discussion about your housing requirements, please contact Martin.Walker@localpartnerships.gov.uk. Local Partnerships is proud to be part of the public sector. We can be directly procured thanks to our joint ownership by the LGA, HM Treasury and the Welsh Government.
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