Councils should manage own housing finance to achieve decent homes standard

The council housing funding system should be fundamentally reviewed, and councils given freedom to control their own budgets, in order to fully conduct repairs and meet key objectives such as the Decent Homes Standards.

This is the conclusion of a report by the Audit Commission, Financing Council Housing, which examines the current system of council house funding.

The Government currently has a manifesto-pledge target to repair all council housing to the Decent Homes standard by 2010.

However, based on its own inspections of council housing, the Commission report suggests that 58 councils will not have enough money to meet this.

The report asks government to consider revising the finance system to allow high performing councils the freedom and flexibility to run their own housing services and make them wholly accountable to tenants.

At present 82% of councils that own housing stock receive no subsidy to help them finance their services. But, they contribute £630 million of their annual rent income to a central pot, which is then redistributed to councils that do not have enough income of their own.

This means a majority of revenue from rent is pooled nationally and redistributed.

However, Roy Irwin, Chief Inspector of Housing for the Audit Commission, told edie news that it was questionable that the amount of money that Councils received from redistributed income was enough for their needs.

“What we’re saying is that it may be better for councils to collect rents themselves and then manage it themselves rather than sending it out to central government. This way each local council could deal with local housing issues and priorities at a local level with local accountability.”

This way, those councils that rely heavily on subsidy should be given extra attention to resolve their regeneration issues such as transforming hard-to-manage neighbourhoods of dilapidated high-rise blocks.

At present, this extra attention, or extra money, is only available to those who separate their housing stock from council control. This means either transferring housing stock to a housing association, setting up an arms-length management company, or most controversially, setting up a PFI company to run housing repairs and maintenance.

If councils opt to carry on managing homes themselves, there is little or no certainty they will receive future money for repairs.

James Strachan, Chairman of the Audit Commission said: “Rather than trying to sustain a complex system of cross-subsidy, we recommend that government should consider allowing those councils that can finance themselves to do just that, and to focus on how to meet the massive capital demands facing some urban councils which are still failing to meet the needs of their communities.”

The Audit Commission has developed six key principles to reflect government policy and the Commission’s own experience of what makes an effective and efficient housing service. It recommends they are incorporated into any reviewed system.

The principles include:

  • providing local accountability for council housing management, investment and condition of stock;
  • encouraging and rewarding high performance, minimising perverse incentives;
  • providing customer focused approaches to the provision of housing in local market setting;
  • establishing an equitable relationship in each locality between charges, service standards and investment in council housing and neighbourhoods;
  • promoting self-sufficiency for each council, while allowing councils to respond flexibly to the circumstances of the local market, providing stability and predictability I their relationships with their tenants; and
  • supporting the government’s objectives for council housing.

    By David Hopkins

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