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Return of the Council House

The biggest council housing build for decades could soon be under way after Gordon Brown indicated that current social housing guidelines for local authorities should be relaxed. This is part of the PM’s plan to kick start the economy by rescuing the construction industry and to trim down the 4.5 million waiting list for social housing. Treasury rules that have been in place for around 30 years have given local councils little incentive to build social housing but now they could be given the opportunity to borrow more money to do so. They could also be further incentivized by being allowed to keep more of the rent money generated. At present, local authorities have to give 75% of the money generated from council house rent (and sales) to the treasury.

The death knell was sounded for council houses in the early 1980s when Margaret Thatcher introduced the right-to-buy but these proposed changes could see a dramatic reversal in a trend that saw just 375 council homes built in 2008. At present, social housing is mostly built by housing associations, funded by government grants, but not nearly enough to fulfil the demand. The plan is to build thousands of council houses on land that already has planning permission but has been abandoned by cash-strapped private developers. Mr Brown told a New Local Government conference: “If local authorities can convince us that they can deliver quickly, and cost effectively, more of the housing that Britain needs, then we will be prepared to give them our full backing and put aside anything that stands in their way.”

The number of people waiting for social housing is predicted to rise to 5 million as the recession bites. Not unrealistic when bearing in mind there are already around 350,000 borrowers in arrears (by three months or more) on their mortgages and an estimated 1.2 million householders in negative equity. The PM’s announcement comes after intense discussions on Labour’s National Executive Committee about how to help the most vulnerable members of society and how to get the construction industry building again. Although Mr Brown has the full support of the Housing Minister, Margaret Beckett he is likely to encounter resistance from the Chancellor, Alistair Darling, who is reluctant to add billions more to the public debt. Last year the government set the target of building 75,000 social houses per year by 2010-11, for both renting and shared equity schemes. On current levels of building this target has little hope of being realised.

The Local Government Association said that the proposed changes would give real incentives for councils to build more housing. Council chiefs were somewhat more cautious, welcoming the opportunity to play a bigger role in home-building, but noting that the changes would not be easy to implement. Identifying the land to build on and borrowing vast sums of money at a time when credit is difficult to come by will be the main stumbling blocks.