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

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: However…
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 Decent Homes New Supply
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