Councillors reject plans to reform council housing finance

PLANS by the government to reform the way in which council housing is financed have been rejected by leading councillors at Hinckley & Bosworth because they threaten to replace one “unfair” system with another.

At the moment, around 150 councils such as Hinckley & Bosworth are forced to hand over a large share of the rent they collect to the government. This money is then used to subsidise the housing services provided by around 50 other council landlords.

Instead of this system, the government is proposing that councils should be allowed to keep all the rent they collect – providing they accept a one-off lump sum share of the housing debts owed by all the other councils in the country.

For a debt-free council like Hinckley & Bosworth, this would be like taking out a mortgage on the housing stock it already owns.

Sanjiv Kohli, the council’s Director of Finance, said: “The government’s commitment to dismantle the Housing Revenue Account subsidy system and replace it with a devolved system of responsibility and funding is very welcome”.

“However, there is a serious problem with the government’s proposals that undermines the commitment to localism and fairness and delivers a serious blow to hopes of boosting housing supply by the numbers predicted.”

David Cope, the council’s Executive Member for Housing, said: “While in one move the government is promising to free local councils to spend the money we collect in rents and receipts, it is at the same time imposing new debt burdens which will have the effect of seriously reducing the freedom of councils to invest in local housing”.

And Council Leader David Bill added: “The proposed changes promise to deliver radical reform, giving councils freedom to manage their housing assets in the interest of their tenants and invest in much-needed social housing. In practise, the reform will fail to deliver unless the government resolves the debt issue.

“If we agree with the government’s proposal then instead of paying the Treasury through our rents as we currently do, we will become the proud recipients of our very own mortgages on our own housing stock - with interest rates controlled by the Treasury.

“We are therefore rejecting the proposal by central government and are pushing, with Waverley District Council and many other housing authorities, for the government to write off the debt entirely as this is the only practical and fair solution for the council as landlord and more importantly for our tenants.