Innovation in council housebuilding: chapter one

Council housebuilding must be at the centre of a renewed effort to deliver homes that generate growth and that communities need now and into the future.

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Council housebuilding must be at the centre of a renewed effort to deliver homes that generate growth and that communities need now and into the future.This was one of the conclusions of the LGA's Housing Commission report 'Building our homes, communities and future'. We are pleased, through this new report, to share examples of councils that are doing just that. The case studies of council housebuilding show how councils are opening up opportunities to build good quality homes that are designed to be accessible, affordable and energy efficient.

After a period of uncertainty created by short-term measures such as rent reductions, Government and councils need to work together to explore options for restoring longer-term income certainty and freeing councils to stimulate a resurgence of council building. Housebuilding by councils at scale would boost local economies and productivity, reduce the Government's housing benefit bill, contribute to tackling homelessness and create revenue-generating assets for communities.

We welcome the proposals announced in the social housing green paper and encourage Government to go beyond these limited measures and scrap the housing borrowing cap, and enable all councils, across the country, to borrow to build once more. This would trigger the renaissance in council housebuilding which will help people to access genuinely affordable housing.

We hope that this report and the case studies of innovation will help to move the housing debate forward, as well as providing practical advice and inspiration to councils and their local partners in housebuilding.

Councillor Martin Tett Chairman
LGA Environment, Economy, Housing and Transport Board

Innovation 

Council housebuilding makes a contribution to the delivery of affordable rented housing. Its significance is in innovation rather than in total numbers: “creating, developing and implementing practical ideas that achieve a public benefit” (Mulgan, 2014).

This includes:

  • addressing local requirements, such as developing homes that meet the needs of older households wishing to downsize
  • providing quality and environmentally sustainable homes through the use of, for example, high design standards that may act as an exemplar for other providers
  • creating added value by, for example, providing training and jobs for local people and boosting the local economy
  • growing in-house development skills that can be used elsewhere in local authorities as well as for council housebuilding. 

Focus

There have been many national studies since the housing revenue account (HRA) self-financing regime was introduced in 2012. These highlight the initial optimism followed by the reality checks created by changing government policies, such as the rent reduction policy of one per cent each year for four years between 2016 and 2020. However, there have been no recent studies that have investigated council housebuilding through the HRA on the ground. This report helps to fill this gap.

The focus is on council housebuilding through the HRA. This is sometimes referred to as ‘direct delivery’, butut care is needed over terminology. Studies on the role of local authorities as housing enablers frequently use the terms ‘direct delivery’ and ‘council housebuilding’ to include both council housebuilding through the HRA and homes built through local housing companies (LHCs). Data on new council housing provision also sometimes includes both types of provision.

Further complications can arise because some local authorities have programmes of (i) council housebuilding through HRAs, (ii) LHC projects and (iii) joint development vehicles with other public and private partners. These deliver a wide range of tenure types including social rent (approximately 50 per cent of market rent), affordable rent (80 per cent of market rent), shared ownership, market rent and market sale.  

For the avoidance of doubt, this study concentrates on council housebuilding through the HRA. This involves the provision of social rented and affordable rented properties. We refer to this as ‘council housebuilding’ throughout this report.

In addition, the report covers national policy developments up to the end of July 2018. The case studies were compiled in early 2018 and have, in some cases, been updated during the summer.

One of the important findings of this study is that councils often have overlapping programmes so as to achieve, for example, mixed tenure developments. This could involve council housebuilding and LHC provision on the same site (as well as provision by housing associations and housebuilders). Furthermore, the in-house skills built up through council housebuilding are transferable to LHCs. There are examples in the case studies in this report where local authorities have utilised this flexibility to shift the development emphasis from one programme to another because of changing national policies.

It is, therefore, essential to recognise that is misleading to view the situation as ‘council housebuilding versus LHCs and other providers of affordable housing’. Council housebuilding is part of the solution for boosting affordable housing supply. It has to be co-ordinated with other delivery approaches through the housing enabling role of local authorities to maximise the benefits for local communities.    

Opportunities

It is an opportune time for this study. There is a growing appreciation that council housebuilding has a role to play in beginning to address the affordable housing supply crisis. Councils are generally optimistic about the prospects while recognising the challenges that exist.

The national policy environment is gradually opening up more opportunities. For example, the government announced (i) a £2 billion boost to affordable housing provision (including council housebuilding) in October 2017 and (ii) in June 2018 invited local authorities to bid for a share of an additional £1 billion of borrowing headroom, restricted to councils in areas of high affordability pressures. The Mayor of London circulated a funding prospectus ‘Building council homes for Londoners’ in May 2018, which was updated in July 2018.

Objectives and report structure

The objectives of this study are listed below and are shown on the accompanying diagram:

  • focus briefly on the role of councils as enablers that includes council housebuilding (chapter two)
  • summarise the recent history of council housebuilding through the HRA (chapter three)
  • highlight the risks of and opportunities for council housebuilding (chapter four) 
  • clarify the type, nature and scale of development – the ‘what’ of council housebuilding (chapter five)
  • explore the local motivations for council housebuilding – the ‘why’ of council housebuilding (chapter six)
  • explain the development process – the ‘how’ of council housebuilding (chapter seven)
  • illustrate, through 10 case studies, the innovative nature of council housebuilding (chapter eight).

The case studies have formed the basis of this project. They are referred to throughout the report as well as being covered in depth in chapter eight. 

The report concludes with two further chapters. Firstly, there is a focus on the outlook for council housebuilding and, secondly, there is a set of recommendations for local authorities and their partners and other stakeholders. The former includes a discussion on the uncertainties, opportunities and risks in the light of an avalanche of national reports, Government announcements and policy statements in spring and summer 2018.  

There is also an appendix which details the sources used in this study. References are included throughout the report. Full details, together with website links (wherever possible), can be found in the appendix.   

The authors would like to thank all of the participants that have contributed to this study, especially those that have helped with the case studies. We also wish to acknowledge the helpful advice provided by staff at the Local Government Association (LGA). Two workshop sessions were held in March 2018 at a Housing Quality Network (HQN) event and an LGA conference where our initial ideas were discussed and subsequently refined. An additional presentation was made at the HQN annual conference in July 2018.

Chapter one diagram