A Labour councillor and the executive member for housing & development at the London Borough of Islington on what we get wrong about council housing.
Everyone seems to agree that we have a housing crisis in London and that we need to increase the supply of genuinely affordable homes. And everyone, including the Prime Minister, seems to agree that a big part of this must be building more new council homes.
So the question is, how do we get council homes built in sufficient numbers to start addressing the housing crisis? To begin, we need to correct some widely-held, but inaccurate, views on council housing. Let’s do some myth-busting.
1. Council housing is subsidised
It isn’t. Far from it.
Here in Islington, most council housing blocks were built decades ago and tenants have been paying rent on their properties ever since. Council housing is administered through an account that is separate from all other local authority spending, the Housing Revenue Account, which has to remain solvent.
Council housing pays for itself either through rents or by the building of some new private homes for open market sale. This is what many councils have to do in the absence of government funding.
2. Housing Benefit covers the majority of Council tenants’ rent
It doesn’t. Households who claim housing benefit to help pay their rent live in all kinds of tenures in both the private rented and the social rented sectors.
Between 1995-96 and 2015-16, the UK’s housing benefit bill increased by 51 per cent – with the largest increase being in the private rented sector, which has seen a rise of 57 per cent over the past two decades.
Housing someone in the private rented sector costs an average of £110 per week in housing benefit compared with £89 in social housing, an extra 23 per cent. Far fewer people would be reliant on housing benefit if they were able to access council housing in the first place, and the government’s housing benefit bill would also come right down – freeing up more funds annually to spend on building new council homes.
3. Council rents are too low and most people can afford the Government’s new “affordable” rents
They can’t. “Affordable Rents”, under the government’s Orwellian definition, are set at up to 80 per cent of market rent in any given area. In Islington, this is completely unaffordable for most people. The median rent in Islington is £1733 per month. With the median gross monthly salary in the borough at £2713, many private rents are around two thirds the average income.
4. Councils don’t care about council housing anymore – they spend their time building private housing
We do care – and we get little government support to build.
In Islington this year, we are building more new council homes than at any time in the last 30 years. But we are forced to build some private housing as part of our new developments to help pay for the new council homes. We do not have the funding to do it any other way.
5. Right to Buy is fine because it replaces any homes that are lost
It doesn’t. Under the current rules, local authorities only receive 75 per cent of the proceeds of any property that is sold under Right to Buy. The rest goes to the government.
But government red-tape means that this receipt is only allowed to be used to pay for one third of the build costs of a new council home: we still need to find the other two thirds.
Right to Buy proceeds are also not allowed to be combined with any other grant funding, so many councils are struggling to spend them in the time allowed by government.
6. Yes, but the Government gives out grants for councils to build new homes
This has been cut massively and doesn’t fund the cost of building council homes.
In London, councils can obtain grants of £60k per new council home from the Greater London Authority, but this generally doesn’t cover any more than a third of the build costs of a new home and it cannot be combined with Right to Buy receipts. Government spending on building new homes fell from £11.4bn in 2009 to £5.3bn in 2015 – from 0.7 per cent to 0.2 per cent of GDP.
7. Then councils should just borrow more to build more
We’d love to, but we can’t. Sadly, councils can’t just borrow to build. The government caps the amount that local authorities can borrow through the Housing Revenue Account.
In our new developments in Islington, the current split between council housing and private housing is around 60:40. If this cap – what we like to call the ‘New Home Blocker’ – was lifted, we could make it 85:15, immediately converting hundreds more new private homes into council homes.
8. Why not just borrow to build homes outside of the Housing Revenue Account then?
Non-housing spending is administered through a local authority’s General Fund. But in an absurd quirk of the rules, councils would be permitted to borrow to invest in commercial property anywhere in the country through this fund, but not to invest to build self-financing council homes for local people that would reduce the housing benefit bill.
9. Councils should rebuild existing estates and use a more efficient design, creating new council homes for the existing residents and more council homes for new residents
Sounds good on paper, doesn’t it? In Islington we’re building new council homes out of old garages, on unused parts of estates, and on top of existing council blocks.
However, unlike new council homes, there is no grant funding available for replacing existing council homes. The bottom line for Islington is that any project must create more council homes than we had before – otherwise, why do it? So larger scale rebuild projects are impossible for us under the current rules.
10. The problem is the bureaucracy of the planning system
Ah, that old chestnut. Conservative peer and Chair of the Local Government Association, Lord Porter, has said that, “The truth is that councils are currently approving nine in ten planning applications, which shows that the planning system is working well and is not a barrier to building.”
The noble lord is also refreshingly succinct when it comes to how we can get more homes built. “The last time the country delivered 300,000 homes which this country needs each year, in the 1970s, councils were responsible for more than 40 per cent of them and it’s essential that we get back to that. In order for that to happen, councils have to be able to borrow to build homes again.”
So I have one ask of the Government: cut the ‘red tape’ around building new council homes
Scraping the New Home Blocker would immediately allow us to build hundreds of new council homes in Islington alone, and would free other councils across the country to do the same.
Ending the restrictions on the use of Right to Buy receipts and grants would also help councils to build more new council homes.
There is no lack of political will in local authorities to build council homes – but the government needs to stop stacking the system against us.
Diarmaid Ward is a Labour councillor and the executive member for housing & development at the London Borough of Islington.