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Government has ‘choked’ council initiatives to build affordable homes

New powers over house building for councils have failed to produce the needed level of affordable homes because of funding shortages in other areas, a new report says.

The report, from the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Chartered Institute of Housing (CIH), says that councils have not been able to take advantage of reforms introduced in 2012, which gave them control over council housing finance instead of the government.

Although the government has not asked for extra payments since it introduced the self-financing settlement, other policies have undermined it, including reductions in council rents, the loss of assets under the new Right to Buy scheme, and reforms to the benefits system, which have meant that benefits claimants are more likely to be in arrears.

Rob Whiteman, chief executive of CIPFA, said: “The situation is desperate. Families across the country will not get the homes they need because the Government keeps on tinkering with housing policy without properly thinking it through. At best, successive governments have turned a blind eye to the consequences of inconsistent housing policy, at worst they have deliberately set out to undermine local authorities' best laid plans.

“By reducing rents to soften the blow of welfare cuts, the government has choked the revenue streams that were meant to fund new house building. At the same time, the Right to Buy policy has led to assets being sold off, further reducing the ability to councils to finance new homes.

“We need urgent action to reset the self-financing settlement, with assurances that its foundations won't be pulled away the moment government attention turns to something else."

Terrie Alafat, chief executive of the CIH, added that CIH and CIPFA are urging government to look again at the policy decisions which have undermined the 2012 settlement, and consider offering councils a new deal over their rents and borrowing, in return for a commitment to increase the numbers of homes they build.

The two organisations recommended that the DCLG should review policy changes that have had an impact on council income and consider mitigating them, whilst local authorities should review their housing business plans, taking into account the factors raised in the report.

In their introduction to the report, Whiteman and Alafat urged the government to consider the results of their report, saying that allowing local authorities more stability in housing funding would make the economy stronger if it faces “an economic storm” following the UK’s exit from the European Union.

Lifting restraints on borrowing

In a separate report, published today, the House of Lords economic affairs committee said that the government must lift restraints on local authority borrowing and increase its target to building 300,000 new homes a year.

Lord Hollick, chair of the committee, said: “We are facing an acute housing crisis with home ownership – and increasingly renting – being simply unaffordable for a great many people.

“The only way to address this is to increase supply. The country needs to build 300,000 homes a year for the foreseeable future. The private sector alone cannot deliver that.  It has neither the ability nor motivation to do so. We need local government and housing associations to get back into the business of building.”

Speaking yesterday at the CIPFA Annual Conference, John Healey, the former shadow housing and planning minister, said that the government should freeze the implementation of the Housing and Planning Act to avoid “further upheaval” on the housing market.

(Image c. Yui Mok from PA Wire)

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