Why are councils returning to direct delivery of housing?
Local authorities are providing housing again on a scale not seen since the early 1990s. Why is this, how is it being achieved and what could be done to support councils more as they focus on housing provision? Professor Janice Morphet of University College London discusses new research looking at these questions
The report, Local Authority Direct Delivery of Housing, was funded by the Royal Town Planning Institute. This is the continuation of research undertaken in 2017. We found that some things have remained the same – particularly the motivations of councils – but the number engaging in direct delivery, using a range of methods, has increased.
The research is based on a variety of sources including direct surveys, desk surveys, roundtables across England and over 20 case studies in the two research projects.
Why are councils returning to housing delivery?
Councils are motivated to deliver housing by a number of issues and often these are in clusters rather than any single issue being the dominant reason.
The first cluster is around strategic council issues. Faced with a growing housing crisis at local levels, councillors consider that it is their responsibility to deliver housing for all parts of their community – whether young families, growing numbers of older people and, in some parts of the country, housing for managers to support the local economy.
Just over 50% of local authorities are no longer council house stockholders but all councils in England have responsibilities under the Homelessness Reduction Act 2018, which obliges them to prevent homelessness as well as to support households once it has occurred.
A further corporate motivation is the removal of the Revenue Support Grant by the government. Councils are looking at ways to support their income to deliver services and provide a sound financial basis for the future that are not reliant on government policies. Here councils are beginning to regard their approach as patient investors.
Finally, and not least, there is a corporate concern about the quality of housing that is being built by the market and the longer-term issues that it may be storing up for councils as a whole. These concerns are with smaller room sizes, poorer estate layouts and increases in buy to let properties. We have found councils unwilling to purchase market housing for their own stock for these reasons.
The second group of motivations relate to planning issues. Councils are frequently frustrated by slow build-out rates of market developers or stalled sites where no development is planned. They are also concerned that renegotiations of planning consents on viability issues are breaking the trust with their local communities that accepted development in return for other associated mitigations agreed within s106 agreements. Councillors have to face their communities when these benefits have been negotiated away after planning consent has been given. Some local authorities have good relationships with housing associations but they vary across the country. The recent takeovers of many smaller associations by larger ones have broken the local links that had been in existence since stock transfer.
The last group of motivations relate to issues of the local economy, including improvement of skills and supporting small businesses, whether builders, suppliers or architects. Some councils have specific programmes to support ex-offenders in skills training or supporting construction apprenticeships of all types.
How are they doing it?
If local authorities are motivated to deliver more housing then how are they doing it? Our research shows that each council starts in a different place and gradually expands the repertoire of initiatives. Some councils have started wholly-owned companies which are being used for a range of functions including development, acquisition, management and joint ventures. Some councils have entered into JVs because they consider that they need skills support, while others have preferred to go it alone.
We found in 2019 that 78% councils have a company and 119 new companies were formed between January 2018 and March 2019.
These companies may take two years to get on site and many are starting with smaller developments, particularly where the council has not maintained an HRA. Where there are HRAs, some councils like Bristol, Nottingham and Birmingham are moving into expected delivery of over 1,000 homes a year using all their initiatives.
Some councils, like Slough, have a JV, two companies and an HRA and others, such as Lambeth and Wokingham, have recently registered as housing associations in addition to their other activities.
Where councils have transferred their stock, we have found that they are still providing homes in a variety of ways, as shown in Plymouth, Eastleigh and South Lakeland. Some councils, such as Wigan, are focusing on delivery for older people and others are returning to provide key worker housing.
In the 2019 research, which focused on 12 planning issues, such as the use of clawback, s106 and quality, major and small sites, we also found that some approaches unite councils who are delivering homes.
The first is that they have a corporate commitment to housing across the whole council. The second is that they have established a housing delivery team that deals with all housing development whether from the private sector, housing associations or the council. This team frequently comprises planners, housing officers, development surveyors, lawyers, accountants and highways engineers. These teams have a hands-on approach to negotiation and adopt very close monitoring of all housing sites in their areas. They are also reviewing all council-owned land with a view to its use for housing.
These housing delivery teams are backed up with local housing groups or fora where all those involved in housing in the area come together frequently. Some of these councils have also established housing intervention funds to deal with site issues, infrastructure or development phasing through the provision of loans or works to be repaid later. Finally, they have a housing delivery board, chaired by a senior politician, that meets monthly to review housing delivery progress and any actions required.
What could help councils do more?
In the survey undertaken last September, many cited the removal of the HRA debt cap. This was important for about half of all councils and perhaps surprisingly, they are being cautious about using this approach now the debt cap has been lifted. Some are very positive but others are concerned about Right to Buy provisions.
Some councils are maintaining their mixed development approaches and providing social rent homes through other cross-subsidy mechanisms. Councils without an HRA have also been examining whether these should be reopened but so far only Liverpool has declared that it will use this approach.
The research has made other recommendations based on its overall findings. These include allowing councils to invest in their housing using its market value rather than having to regard it as debt.
In planning, the role of the local plan primarily supports the provision of market housing. The report recommends a government review to change planning guidance to allow local plans to identify types of housing required including tenure on the plan site allocations. This could be supported by a review of the use classes order.
While funding for new housing development has not been reported as an issue in our research, the approach taken by the mayor of London to make £1bn available for social rent subsidy for new housing is one that could be rolled out by Homes England elsewhere.
Also, the mayor of London has provided a skills fund of £10m to support those councils in receipt of this funding to develop their skills for its delivery. This again could be made available elsewhere through Homes England.
On standards and housing need, the report recommends that these issues should be addressed through local plans. While the government’s housing policy has become more focused on social and affordable rent to meet local needs, this is not mirrored in planning policy as recently set out in the revised NPPF. The report recommends that this is addressed as a matter of urgency – an approach that is being recognised in Wales.
Local authorities are now delivering housing and are set to deliver more. While councils can use some of the approaches identified in this research to further improve their delivery, government will also need to make some major shifts if it wants to deliver more housing in the future.