Independence...Integrity...Value

Council Housing Finance Settlement 2011/12

December 2010

This papersummarises the 2011/12 council housing finance settlement.

On 5th October 2010it was confirmed by the Conservative – Liberal Democrat coalition governmentthat it was their intention to replace the current Housing Revenue Account Subsidysystem with a reformed system of council housing finance.

This is to beintroduced through the use of the Localism Bill. However, until a new system isput in place the current Housing Revenue Account Subsidy system will remain inplace. The Comprehensive Spending Review for 2011 to 2015 was announced on 20thOctober 2010. It included significant reductions in government housing budgets.This was followed in November 2010 by the publication by the Homes &Communities Agency (Homes & Communities Agency) of its proposals for decenthomes backlog funding for council landlords for 2011 to 2015 and by thepublication of the 2011/12 Housing Revenue Account subsidy determination.

The Comprehensive SpendingReview has led to a significant reduction in the government’s housing budgetsas part of their plan to reduce the public sector deficit. Funding for thedecent homes standard in local authorities between 2011 and 2015 is £1.6billion– somewhat less than the £8.9billion that was envisaged in the consultation paperof July 2009. The Homes & Communities Agency has proposed that councilswith more than 10% of their stock non-decent will be able to bid for an averageof £10,600 a unit over that 10% threshold. This should result in some resourcesbecoming available to retention authorities with more than 10% of their stocknon-decent but will certainly result in less funding being available toauthorities on the arms length management organisation programme.

The 2011/12 housingrevenue account subsidy determination includes a 6.8% increase in guidelinerents and minimal or no increases in management, maintenance and major repairsallowances. This means that there will be an increase of £295million in the amountof negative subsidy. An increase in rents of over 6% will clearly be greaterthan the increase that is expected in the retail price index in April 2011 andsignificantly more than the increases that most tenants who pay their own rentwill receive in salaries, wages or pensions. Most of the cost of the rentincreases will probably fall on the government’s housing benefit budget, but ifhousing benefit reforms mean that tenants’ entitlement to housing benefit willreduce that could cause hardship for tenants.

It is also likelythat the 2011/12 housing revenue account subsidy determination will feed throughinto the self-financing settlement of 2012. The assumptions about increased rentsand modest increases in expenditure are likely to lead to the calculation of ahigher level of debt in the self-financing settlement than had been envisagedin the March 2010 consultation paper.

Overall, the2011/12 council housing finance settlement is not good news for councils or theirtenants.

Forfull briefing paper please click here.

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