Each year those local authorities with council housing send in a host of statistics relating to their stock to the Ministry of Housing, Communities & Local Government. Amongst other things they tell us how many homes have been built or bought, how many homes have been sold under right to buy or demolished. I have extracted some of the statistics from the last two years available, examining what they tell us, including the differences between political administrations which run the housing revenue accounts. (Read on below or download a PDF here)
1) “Borrowing to build”.
In 2018 the government abolished the borrowing cap which was introduced in 2012, allowing councils the “freedom to borrow”. We have been told that if only councils could “borrow to build”, or “borrow against their assets”, there would be a big increase in building programmes. This takes no account of the finances of HRAs. There has been no glorious renaissance of council house building. In 2018-19 there was an increase yet councils still built less than 5,000 that year and in 2019-20 the numbers were back down to the same level prior to the abolition of the borrowing cap. Even if you add the acquisitions (homes bought, often ex-council homes) the combined number still did not reach 7,000.
Why have these councils not been utilising their “freedom to borrow” on a much greater scale? Largely for two reasons:
a) The shortage of central government grant and the continuation of right to buy.
Councils have to compete with housing associations for what grant is available. The new build has to compensate for losses from RTB and demolition. As you can see from the last two years shown below, the overall council housing stock numbers have continued to fall when you take account of RTB sales and demolitions. They have fallen by more than 6,000 a year in each case; more than 40,000 over the 5 years.
b) The debt with which housing revenue accounts are still saddled.
What supporters of “borrowing to build” fail to take account of is the financial circumstances of HRAs. Collectively they are saddled with a bogus debt of around £26 billion1. Around 15% of their £8 billion a year income goes to servicing it (paying off loans and interest on them). Last year only £970 million was spent on capital expenditure and this includes renewing key housing components of existing homes, building new ones and/or buying stock at market prices. That’s just 12% of HRA income.
This underlines the fact that a large scale council house building programme is impossible without central government grant on the scale of the £10 billion a year which Labour was committed to in 2019 and reinforces The case for cancelling council housing debt.
It is true that borrowing has always been a componet of the process of council house building.
For instance, in the classic case of the Atlee government £16.50 per property ws government grant, £5.50 from the local rates (preccursor of the council tax); that is £22 a year for 60 years, which was effectively 100 of the cost of building. Councils then borrowed from the Public Works Loans Board to pay the upfront construction costs. Historically there has never been a large scale council building programme without government funding.
2) Right to Buy.
In the last five years, however many new homes have been built and purchased, council housing stock in England has fallen by more than 40,000. True, the government has imposed restrictions on the use of RTB receipts. Only 30% of the cost of a new build can be covered by RTB receipts (soon to be 40%). The other 70% has to be covered by an HRA’s own resources or by borrowing. But even if the government allowed councils to use all their receipts building would still not be on a scale anything like enough to address the housing crisis.
To add insult to injury the government has now changed RTB regulations to enable councils to have the power to use receipts for shared ownership and First Homes. If councils take up this power (they are not obliged to) it will mean even less replacement council homes built.
3) Political control.
Nearly 62% of council housing in England is owned by Labour councils. Of the 91 councils run by Labour 65 have HRAs, 26 don’t. Of 120 Tory councils 51 have HRAs and 69 don’t. The much higher number of homes in Labour areas reflects the fact that many of these are in metropolitan areas and probably that there were more stock transfers in Tory areas, though there were plenty in Labour areas. There are only nine Conservative authorities with more than 10,000 council homes whereas Labour has 37, with 21 of these more than 20,000.
4) In 2018-19 the average number of homes built by councils was just 28, falling to 21 last year. Labour councils built double the homes that Tory councils built, though the numbers are still very low. In the last two years Labour councils built and bought 7,356 homes but lost 18,499 via RTB and demolitions; an overall loss of 11,143.
4) In 2019-20 ony 27 councils built more than 50 homes, 17 of them Labour. In 2018-19 it was 35, 19 of them Labour.
Note: if you want to check what your council is doing you can find Local authority housing statstics data returns here – 2009-10 – 2019-20
or we have extracted data on housebuilding, purchases, demolitions and Right to Buy sales here for 2019-20 and 2018-19:
1 We say it is bogus because council tenants have paid more in rent that the costs of borrowing for previous council house building programmes. In the 25 years to 2008 council tenants paid £91 billion rent but councils were given only £60 billion in ‘allowances’. The £31 billion difference was more than the outstanding borrowing associated with building programmes.