Council house finances to be revamped

Plans to revamp the council house financing system were unveiled by Housing Minister John Healey today.

The consultation on reforming the current Housing Revenue Account (HRA) subsidy system proposes a devolved self-financing model which removes the need to redistribute revenue nationally while continuing to ensure that all councils have sufficient resources.

Councils will finance their own business from their own rents and revenues, in exchange for a one-off allocation of housing debt.

By freeing councils from the annual funding decisions in the current system, councils will be able to plan long term and improve the quality of services to their tenants.

Councils currently provide around 2 million rented homes and, alongside, housing associations they provide decent, secure and affordable accommodation for over 8 million people.

The consultation seeks views on a wide range of council housing issues including:

• Dismantling the current Housing Revenue subsidy system and replacing it with a fairer, more transparent system that will give councils greater independence and freedom to manage their housing resources.

• Increasing local responsibility and accountability for councils, giving them the opportunity to think and act more strategically in the longer term when managing their assets and meeting the housing needs of local people.

• Allowing local councils to keep all the rental income from tenants as well as any proceeds from Right to Buy sales that can be reinvested locally.

John Healey said: "Over £33bn has been invested in improving council and housing association homes since 1997 and by the end of next year we expect 95% of these homes to be warm and weather-proof. If we are to maintain these improvements for the long term then it is imperative to reform the system which finances council housing.

"The proposals I am publishing today will free councils from annual funding decisions so they can plan long term and improve the management of their homes, secure greater efficiencies and improve the quality of services to their tenants."

Councils will be freed from the national Housing Revenue Account subsidy system which redistributes resources between local authorities based on need. This system has allowed little incentive or freedom for councils to plan long term for housing need in their area or to deliver more efficient services.

Under the proposed self-financing system, councils will be freed from central government intervention; they will be able to generate sufficient income to sustain their stock; and will have to produce thirty year business plans. The consultation also proposes continuation of the Decent Homes Standard.