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Council Housing Finance Reform

Headlines, Issues and Impacts on London West London Housing Partnership 16 February 2011. Council Housing Finance Reform. The Headlines. A dismantling of the Housing Revenue Account Subsidy System and a move to Self-Financing from April 2012

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Council Housing Finance Reform

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  1. Headlines, Issues and Impacts on London West London Housing Partnership 16 February 2011 Council Housing Finance Reform

  2. The Headlines • A dismantling of the Housing Revenue Account Subsidy System and a move to Self-Financing from April 2012 • Facilitated by one-off redistribution of £28bn of housing debt • A discount rate of 6.5 per cent • Uplifts in allowances in line with previously commissioned research • £116m extra funding each year for disabled adaptations • Continued subsidy for PFI schemes currently funded through HRA • An aggregate debt cap linked to the opening debt level under self-financing • Continued retention of 75 per cent RTB receipts by HMT • Settlement imposed by statute rather than on a voluntary basis • Right for Secretary of State to reopen deal if terms change

  3. Financial Impacts on London • £2 billion (26 per cent) reduction in London’s Housing Debt from £7.5 billion to £5.5 billion • £10 billion (94 per cent) increase in Rest of England’s Housing Debt from £9.9 billion to £19.2 billion • £1.6 billion total (£57 million average) in London borough ‘borrowing headroom’ • £2 billion total (£14 million average) in Rest of England local authority ‘borrowing headroom’ • £1.2 billion total (£41 million average) Decent Homes backlog in London • £1 billion total (£7.5 million average) Decent Homes backlog in Rest of England

  4. Potential Response • Clear concerns regarding: • Debt cap enshrined in legislation • Ability of Secretary of State to reopen deal at a later date • The principle of HMT retaining proceeds of Right to Buy sales • Sustainability of proposals at an individual borough level • However… • At a regional level London does well given policy constraints • Proposals end the subsidy system and end negative subsidy transfer • Allowance uplifts in London (16 per cent) are better than average (14 per cent) • Self-financing is the best and most workable deal for council housing finance and it looks like being delivered.

  5. Emerging Issues • Debt • Interest rate risk, timing of debt transfer • Possibility of a London Housing Bond • Decent Homes • Future investment rounds? • Despite headroom some boroughs still fall short of resource • New Supply • Interaction with Affordable Rent model • Moving towards a tradeable HRA? • Freedom on local rents, tensions with DWP

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