Councils must prove themselves as developers

In the 1950s, English councils built 1.4m homes; in the 2000s, they built just 2,000. Housing associations and private house builders, meanwhile, were unable to keep up with demand. The shortage of homes across all tenures especially affects people on low incomes – exacerbated as housing costs outstrip inflation and welfare entitlement.

During this decline, local authorities that retained housing stock were largely restricted to dealing with diminishing poor quality properties.

Decent Homes programmes alleviated matters, but the revived Right to Buy and rent reductions create a danger that the former trend may return. However, recent changes have enabled councils to take back some control over supply and management. For example, Housing Revenue Account self-financing provides more freedom to manage their housing stock as a business. The Localism Act 2011 also makes it easier to establish council companies or joint ventures.

Increasingly, councils are engaging directly in developing new homes. This takes different forms, including where the private sector is not delivering, such as the range of tenures available, focusing on those in greatest housing need and infrastructure investment. It involves making better use of existing assets and taking advantage of low interest rates. It includes generating income to make up for reduced government funding, low business rates and increased homelessness costs. In part, this reflects councils being less inclined to trust other Devolving power to local councils can help to solve the housing crisis but only if they use it properly, writes Campbell Tickell associate director Maggie Rafalowicz Councils must prove themselves as developers providers, such as housing associations, to deliver in line with their priorities.

Beyond direct provision, in the 1990s, most councils’ main role in relation to new housing was as the planning authority, and the provider of discounted land. Councils’ roles have become more varied in recent years, in increasing supply, creating the vision for development, and acting as the enabler; identifying sites, assembling consortia, liaising with landowners, facilitating planning permission and exploring different funding options, possibly providing grant themselves.

What we see now is councils moving beyond the enabling role to that of developer. This can include preparing the infrastructure, decontaminating land, commissioning architects and dealing with difficult areas like estate regeneration in all its forms – physical, social, economic, public realm. The ability of councils to ‘de-risk’ sites has been key to progress in developing challenging schemes.

A critical element now is whether involvement in progressing a scheme can generate income for an authority, or can contribute to savings, such as on homelessness. As property values rise, councils want to benefit from increasing asset values rather than transfer housing stock as many did in the past.

Funding sources have widened, and over 120 councils have set up development companies. Most commonly, this is a 100 per cent owned subsidiary. However, some have created joint ventures with neighbouring councils, other public bodies or private companies. And the development companies deliver new homes across tenures – homes for sale (market or discounted), shared ownership, private rented sector or affordable rented sector. This is a time for councils to be bold and take the fight to the housing crisis.

This article first appeared in the New Statesman Housing Policy Supplement. Click here to read.

Maggie Rafalowicz is Associate Director at Campbell Tickell. For more information or to discuss this article, please contact: maggie@campbelltickell.com