Professor Janice Morphet, Bartlett School of Planning, University College London, gave a presentation on a research project she had undertaken with a colleague on Local Authority Direct Provision of Housing, which was funded by the National Planning Forum and Royal Town Planning Institute.
The presentation focussed on Local Authority Direct Provision of Housing: motivation, methods and money. The main objective of the research was to use the findings to share practices between Councils.
The research had provided a lot of evidence that Local Authorities were providing housing again. Twenty-seven different methods were being used to providing housing by authorities of all political parties, sizes and locations. 91% of Councils were currently engaged in providing housing. Housing provision was an act of localism and many Councils were unaware of what their neighbouring authorities were doing. Local Authorities saw housing as a core function and many wanted to be active after the period of austerity since 2010.
Round table discussions were undertaken in all English regions with planners and housing officers. A questionnaire, interviews with experts, snapshot surveys and case studies were also used to undertake the research.
With regard to motivation, many Councils were taking a problem solving approach, starting with an issue and thinking about how to deal with it. Some of the main motivations identified included: private sector not building the type of housing needed quickly enough, unimplemented planning permissions, tackling homelessness, income generation, housing for specific need groups, dealing with problem sites, design quality and regeneration.
Although quite a lot of work had been done by Councils with Housing Revenue Accounts, a lot of building was also taking place by Councils that no longer owned housing stock. Some Councils were going back and re-registering. Councils who were building themselves were in control and could provide good quality.
With regard to tackling homelessness, the quickest way was to buy stock on the open market. The advantages included paying less to support those families who were homeless and getting them into a stable situation. Harrogate Council had built a hostel and several Councils in the south of England had purchased Bed and Breakfast properties to manage themselves.
In respect of income generation, Councils had to mitigate for the loss of the Revenue Support Grant in 2020. Councils were looking to build houses to rent to provide an income stream which could be used to cross-subsidise.
An example of specific need groups, particularly for University towns, was to provide housing at market rent aimed at graduates, to encourage them to stay in the town. Birmingham had used this model and the housing provided had been massively over-subscribed, leading them to start building two further developments. The Isle of Wight had provided housing aimed at older persons.
It was highlighted that the Government was currently looking at penalties that could be placed on developers to encourage quicker house building rates and prevent developments with planning permission from stalling. It was easier for landowners to control what was happening on a build.
Another motivation was regeneration, particularly city centre development of housing. Stockport Council was re-developing heritage assets such as old Mills, some of which had been acquired through Compulsory Purchase Orders (CPOs). Imposing CPOs had revealed ownership of land and buildings by banks, HMRC, and owners who were either abroad or in prison. It was noted that banks were particularly keen to work in partnership with the Council to get such sites developed.
Councils were also providing opportunities for apprenticeships for professions as well as trades. Harrogate Council offered a Development Surveyor Apprenticeships and Stockport offered a specific scheme for ex-offenders to work on construction.
A range of powers were being used to engage in housing provision. The Localism Act 2011 provided the powers to establish wholly owned and joint venture companies. Councils could also use the Housing Revenue Account and act as a Homes and Community Agency (HCA) registered provider under the Local Government Housing Act 1989 (as amended). It was noted that there were a range of powers available that could be utilised.
In respect of funding, many Councils started with their Housing Renewal Account (HRA) and then sought other sources of funding. About 200 Local Authorities were registered providers with the HCA with an HRA and approximately 170 were active. The second most common source of funding was the Councils own finance, for example loans from the General Fund. Under State Aid rules any money loaned from the General Fund had to be paid back with interest. Use of the Councils own land and buildings was also common.
Public Works Loans Board funding was commonly used to support both companies and building directly by Local Authorities. Loans were relatively easy to secure and the interest rates were very low.
Other funding sources included Right to Buy receipts, Section 106/affordable housing contributions and development funds from Homes England. Beyond those common sources, a wide range of other sources of funding had been used by a smaller number of authorities including commercial loans, loans from other authorities, joint venture partner finance, devolution and city deals, including a Hedge Fund.
There were many different routes to provision identified during the research project. Joint Venture approaches seemed to be quite popular in the north east. Partnerships could be set up with other public sector bodies or with the private sector. The HRA could be used to build or acquire properties. For Local Authorities with retained stock, Right-To-Buy (RTB) receipts or hidden homes projects, for example re-developing garages or additional floors in existing housing estates were options. Open market purchasing of existing stock including former RTBs was quite common, particularly in relating to tackling homelessness. Some Local Authorities had establishing housing companies, usually wholly owned. North Tyneside had established five different companies, all covering different areas such as house purchases, regeneration and site development. Councils could use a variety of mechanisms to provide housing that suited their needs.
According to the survey carried out as part of the research, in 2017, 65% of local authorities were now engaged in direct delivery of housing. 22% of the overall sample were actively considering engaging in direct delivery and 13% were not engaging and not considering doing so. A November 2017 desk survey of all wider means of engagement in housing provision that local authorities might use, including not just direct delivery through the HRA, building under the general fund, and a wholly owned housing company, but also support for partner organisations; found that 91% of local authorities in England were engaged in such support for housing provision in one way or another.
Authorities from all regions of England were providing housing directly, however a higher than expected concentration of authorities were not providing in the North West. Those authorities directly engaging in housing delivery had higher than average populations, higher objectively assessed housing need, tended to be registered providers with HCA, had slightly less protected land and were slightly more likely to have an adopted Local Plan, than those not engaging.
44% of authorities responding to the survey had established a local housing company (2017). This figure was now probably over 50%. These authorities tended to have higher populations and housing need.
Local Authorities were building all tenures and those responding to the survey indicated that they had already delivered: affordable 452, social 264, intermediate 307, for sale 442 and for rent 432. Many authorities had plans for major development of homes and could build quickly.
With regard to the quality of housing being built, the lack of qualified trades people was highlighted as a possible issue. It was noted that some Councils were now looking at more modern methods of construction and using factory built houses. Whilst there were issues with the availability of mortgages for this type of build, they were suitable for rental.
It was suggested that it may be more desirable for a Council to set up their own housing company rather than enter a joint venture in order to build houses more quickly. In response, it was highlighted that most Councils were using more than one model. Some Councils had also set up companies for property management and maintenance.
Regarding income from Council-owned homes that were rented out this could be used in part to offset any loan taken out and the rest paid back to the Council as a continuing surplus. Councils could take the income and use it for other purposes such as social care, keeping other services running or investing in more housing.
With regard to social rented housing, most Councils provided a mix of tenures and not solely homes for social rent. A proportion of each development would be social housing, a proportion for sale and a proportion for private rent. For each individual site the Council had to consider what it was trying to achieve, how the development would be funded and what the desired outcome was.
The Chair thanked Janice for attending the Panel and for her informative presentation.
AGREED as follows that:
1. The information provided was received and noted.
2. The following Terms of Reference for the scrutiny review of Housing Delivery Vehicles were approved:
A) To investigate different models of Housing Delivery Vehicles (HDVs) and the benefits and challenges they can provide to Local Authorities including evidence of best practice models in operation.
B) To identify the initial resources needed to set up a HDV as well as the potential financial returns.
C) To examine Middlesbroughs Local Plan to understand what sites are currently available for housing throughout the town and how the projected increase in population and need for a further 5,500 dwellings by 2029 can be met.
D) To investigate how Middlesbrough Council can ensure that the requisite associated infrastructure for new housing development including roads, schools, services and green spaces can be delivered in conjunction with a HDV.