Since the Prime Minister danced onto stage at the Conservative Party conference lots has been written about her key message over the abolition of the HRA debt cap.
This has been well received by many as it will hopefully allow local authorities to return to the business of building houses but until the finer details have been released it is still a guessing game as to what this statement will mean in terms of the ability for local councils to borrow to build new homes.
The 2012 subsidy reform exercise saw local authorities with a local housing stock buy themselves out of the housing subsidy system. The 30-year business plans put together were focused on servicing this debt as well as maintaining the existing stock, the debt cap restricted further borrowing so plans were not set to accommodate more borrowing to build new homes.
Many local councils saw the debt cap as a barrier to development and looked at setting up local housing companies as a way of bringing forward the delivery of new homes outside of the constraints of the HRA. The HRA ring fence and its debt cap might frustrate councils from building new homes but another factor to consider is the Right to Buy and local housing companies were also seen as a way to circumvent this restriction.
Not all councils hold a housing stock with many transferring their homes to Registered Providers under LSVT’s. These areas of the Country still have a housing need but if they have no HRA how can they borrow to add more homes without re-opening the housing account? Also tenants of RP’s may have the Right to Acquire and this frustrates new development in this sector.
Back in 2015 the then Housing Minister, Brandon Lewis, stated that “I will not support any council setting up a housing company unless their tenants continue to have the chance of having a Right to Buy”. We are on our third Housing Minister since Brandon Lewis made this statement, but no minister has spoken out to say that housing companies are the way forward or that the Right to Buy does not apply to the tenants of these delivery vehicles
Here at Arlingclose we have long held the view that using a housing company to either keep housing outside of the HRA or the Right to Buy could cause councils problems at some point in the future, either through ministerial intervention or challenge by a tenant. In view of this we developed a housing delivery vehicle, backed by a QC’s opinion, which will allow local authorities to deliver housing without the need to account within the HRA or grant the tenant the Right to Buy. We feel that in even in this post debt cap era our delivery vehicle is more appropriate than a wholly owned company and any council interested in finding out more about this structure should contact Mark Swallow (mswallow@arlingclose.com) to discuss.