Innovation in council housebuilding: chapter two

The primary aim of this chapter is to locate council housebuilding within the wider role of local authorities as housing enablers.


Enabling sets the context and culture for actions to boost affordable housing supply. Our case studies demonstrate that council housebuilding is one of a number of interrelated ways in which local authorities directly help provide new affordable rented homes. The use of (i) wholly-owned LHCs, (ii) joint delivery vehicles with private and public sector partners and (iii) community-centred initiatives (such as community land trusts and self-build/custom build) are the other major approaches. Councils also support other providers through enabling activities such as housing associations, housebuilders and third sector organisations in boosting affordable housing supply.

As has been highlighted in the introductory chapter, these different approaches are complementary and they are each facilitated by a strong overall enabling function. 

Housing enabling function

Councils have always worked with other public and private sector housing providers to address housing issues. However, it became much more significant from the 1980s onwards with the decline of council housebuilding. Recent reports and our case studies have shown that it is a vital element of delivering affordable rented housing, including council housebuilding, as well as other tenures.

The Elphicke-House report (2015) summarised the five dimensions of enabling as:

  • community leadership and strategic vision, for example galvanising local support for boosting housing supply and making the case for housing investment
  • creating housing opportunities by making effective use of councils’ assets
  • shaping a stronger housing finance market, for example identifying innovative financial mechanisms such as investment by local authority pension funds 
  • management of housing supply by identifying land for residential development, including small sites
  • business leadership by bringing together partners to deliver better housing across all tenures. 

It further highlighted that there were a number of interrelated activities to boost affordable rented housing supply, including:

  • working in partnership with housing associations by, for example, making sites readily available, including disposal at less than market value
  • collaborating with housebuilders and landowners to ensure that planning agreements to deliver affordable housing are maximised
  • investigating the potential of new delivery vehicles such as local housing companies and joint ventures between the public and private sectors
  • making effective use of opportunities for council housebuilding.      

In relation to the latter, it noted that there had been a resurgence of interest in council housebuilding by stock-owning local authorities following the self-financing settlement in the early part of this decade. However, by 2015, a number of councils had reached their borrowing capacity. Recommendations in the Elphicke-House report (2015) for the Government included greater flexibilities for local authorities on additional borrowing and use of right-to-buy receipts to enable the delivery of replacement units on a one-to-one basis following the sale of council houses. 

Enabling dimensions (as set out in the Elphicke-House report)

Relevance for council housebuilding

Case study examples

Community leadership and strategic visioning

High political priority for boosting affordable housing supply, including the use of council housebuilding

Nuneaton has council housebuilding as an explicit  political priority following a small successful pilot project

Use of council assets

Identifying underused HRA and general fund sites

Camden, through its community investment programme (CIP), robustly reviews its land and property portfolio on estates identified for regeneration

Shaping a housing finance market

Utilising and co-ordinating a wide range of funding streams for council housebuilding

Stoke-on-Trent utilises many funding sources for each project, including potentially:

  • HRA headroom borrowing
  • HRA reserves
  • new homes bonus
  • right-to-buy receipts
  • Homes England grants
  • leaseback via financial institutions

Managing land supply for residential development

Focussing on sites that are not attractive to other public and private housing developers, for example infill sites on council estates

North Kesteven utilised a large number of small sites on and around council estates that has helped to meet land supply targets in the local plan

Business leadership

Working with and supporting other organisations such as small and medium enterprises (SMEs) in the local construction supply chain

Birmingham has developed a specific commissioning and procurement approach to support seven SME housebuilders on sites with 15 or less units

Boosting new affordable housing supply – the complementary role of council housebuilding

Our case studies illustrate that council housebuilding is complementary to other approaches for delivering affordable housing. Northumberland has utilised four approaches:

  • council housebuilding programme directly and through its arms-length management organisation (ALMO)
  • wholly-owned development company
  • community land trusts (CLTs) supported by a third sector enabler
  • facilitating development by housing associations.

Oxford City Council originally had an ambitious council housebuilding programme. However, Government policy changes (such as rent setting), together with the HRA headroom borrowing cap, made the programme difficult to deliver due to financial constraints. This has resulted in a switch of emphasis to a local housing company (LHC) – Oxford City Housing Ltd, but still allowing the local authority to continue to build its own homes. It has a joint venture company with Grosvenor Developments Ltd for the development of Barton Park, which will provide over 900 properties (40 per cent of which will be affordable homes). Originally, the council housebuilding programme would have been a major part of the development, but this has now been replaced by the LHC. The development of the Oxfordshire growth deal during 2018, however, opens up the possibilities for the local authority of utilising funding to build council homes.