This chapter considers the outlook for council housebuilding in both the short and long term.
Councils have an appetite to take forward plans to boost affordable housing provision, including council homes, even in situations where existing programmes have been curtailed or halted because of HRA funding concerns (for example Stroud). This is illustrated by the emerging evidence by the end of July 2018 that there is, according to ‘Inside Housing’ magazine, an overwhelming demand for funding through the individual additional HRA borrowing programme. This is especially the case in London, where at least 21 boroughs are set to submit bids. This reinforces the findings from the online survey and the case studies that councils have specific projects in the development pipeline, some of which are shovel-ready. Thus, despite existing challenges, there is compelling evidence that councils are able and willing to innovate to take schemes forward now.
This appetite has been fuelled, in part, by the gradually more positive national policy environment. The Ministry of Housing, Communities and Local Government (MHCLG), as has already been pointed out, has clarified the social rent-setting policy for 2020 to 2025 as well as taking forward the bidding process for the individual additional HRA borrowing programme. Homes England has emphasised the importance of localism and devolution to meet Government housebuilding targets. In addition, it has highlighted the enabling role of local authorities, including council housebuilding (see also chapter two).
Nevertheless, despite this relatively more favourable climate, the longer-term opportunities remain constrained by uncertainties and risks.
Uncertainties
There are two major uncertainties that affect the future scale of council housebuilding: national policy changes and public finance.
In relation to the former, the broad concern is the lack of a stable decision-making environment because of new and unexpected national policy announcements that necessitate revisions to HRA business plans and capital programmes. The self-financing regime for HRAs in 2012 was supposed to create this situation. However, it was undermined by, for instance, enhanced support for right to buy (RTB), social rent cuts of one per cent per annum between 2016 and 2020 and the cumulative impact of welfare changes. The consequences for councils have been threefold:
- greater degree of caution in taking forward projects
- regular, and often annual, reviews of HRA business plans
- building flexibility into programmes so that, for instance, council housebuilding projects can be converted into local housing company schemes.
A number of the case study councils indicated that each of these factors is being built into future programmes.
The latter centres on the Chancellor of the Exchequer’s autumn budget in November 2018 and the public sector spending review in 2019. These will be major determinants of the scale and nature of council housebuilding programmes in the 2020s. A number of case study and online survey councils pointed out that the gradual growth of Government support since autumn 2017 was welcome, but more fundamental changes in policies and funding were required if council housebuilding is to make a significant contribution to boosting affordable housing supply.
The LGA has started the debate on the public spending review through its report, published in July 2018, on ‘Housing, planning and homelessness – moving the conversation on’. It includes five ‘asks’ of Government:
- meet the unexpected costs following the Grenfell tragedy of fire safety work and major remedial work by councils
- give councils a major role in shaping affordable housing programmes
- remove the HRA borrowing cap from all councils
- reform RTB to enable one-to-one replacements
- enable councils without HRAs to access borrowing to develop new homes.
Risks
As the case studies demonstrate, there are an emerging set of risks associated with individual council housebuilding programmes. The key considerations, together with mitigating actions, are shown in the table below.
Table seven: key risk factors
|
Risk factors |
Commentary |
Examples of mitigating measures |
|
Changing council priorities |
Lower priority for council housebuilding |
Making the case for council housebuilding including added value, for example training and support for SMEs |
|
Changing HRA priorities |
Focus on stock improvement could limit the scope for new housebuilding |
Camden case study illustrates that estate regeneration programmes can successfully blend new build with modernisation/stock improvement |
|
Lack of land |
Future lack of council-owned sites and a reliance on open market purchases may make schemes unviable as well as pushing up the price of land |
This could be addressed by joint working with developers (including housing associations) and landowners |
|
Purchase and acquisition of new and existing stock |
Although this approach can overcome the time taken to develop new schemes, the location and quality of stock could be problematic |
Clear guidelines are required on the purchase and acquisition of existing stock; collaboration with developers on purchase of new properties can also address this factor |
|
Use of commuted sums in Section 106 agreements |
This could contribute to greater competition between councils and housing associations on planning agreements |
Collaboration between councils, housing associations and developers on planning agreements |
|
Skills |
Lack of in-house skills such as design, viability assessment and project management |
Working in partnership with adjoining councils and/or housing associations can tackle this factor |
|
Construction costs |
Rising costs may lead to schemes becoming unviable |
Councils should consider if they can take forward recommendations in the Farmer review, such as modern methods of construction |
Two broad types of interrelated mitigating actions are significant. Firstly, making the case for council housebuilding internally and with external stakeholders (such as housing associations) is vital. Secondly, collaboration with housing associations and developers is increasingly important to avoid competition (and conflict) over, for instance, land purchase and planning agreements. The Chartered Institute of Housing reports in 2017, ‘Working together to meet housing need’ and ‘Building bridges’, highlight the challenges and opportunities of partnership working between councils and housing associations. They recommend a series of steps, including:
- better understanding of the priorities and issues of each party
- working together to arrive at mutually acceptable solutions to problems
- ongoing dialogue between officers
- formal governance arrangements.
Opportunities
The case studies and the online survey highlighted four specific local opportunities for council housebuilding:
- meet housing requirements
- promote housebuilding through the exemplar role in relation to quality standards and the use of small difficult-to-develop sites
- contribute to community engagement and link to initiatives on neighbourhood planning, especially in the case of estate regeneration schemes
- highlight the added value of council housebuilding, including meeting the needs of older people and boosting the local economy through training/skills development and supporting SMEs in the construction sector.
More broadly, there are four opportunities through council housebuilding to contribute to the national policy agenda. Firstly, there is high-quality housing design. The Government has frequently reiterated its importance, culminating in the revised National Planning Policy Framework that was launched in July 2018. The Secretary of State for Housing, Communities and Local Government commented that “building attractive and better-designed homes in areas where they are needed is at the centre of new planning”. The case studies demonstrate that local authorities, through their council housebuilding programmes, can be at the centre of this initiative.
Secondly, the appetite of councils to make use of funding opportunities, such as the bidding round for the additional individual HRA borrowing programme, demonstrates a willingness to respond promptly and innovatively to national initiatives. The MHCLG and Homes England, as one councillor of a case study authority emphasised, “can be assured that local authorities will react positively if and when further funding opportunities are offered”.
Thirdly, growth deals incorporating affordable housing provision, including council housebuilding, between the Government and groups of councils (especially combined authorities) demonstrate the potential of, and the willingness to take forward, the devolution agenda.
Fourthly, the success of council housebuilding should be an important element of the debate on the future of social housing (including the government’s Green Paper on this topic). The Chartered Institute of Housing, for example, in its report ‘Rethinking social housing’, published in June 2018, highlighted this issue. The scale, quality and role of programmes in areas such as Birmingham and Camden demonstrate its potential in transforming rundown neighbourhoods and tackling unmet needs. It also challenges effectively some of the myths associated with social housing such as poor-quality homes and stigmatised neighbourhoods.