New housing delivery by local authorities - a return to future past?

In January 2015 the findings of an independent review (click to view) commissioned by the Treasury on the construction of new housing by local authorities were published. Huseyin Huseyin, a solicitor in Forsters market leading commercial real estate practice sets out the key elements of the report.

The review looks at the challenges local authorities believe are restricting their opportunities to build new homes and how these challenges can be overcome. The review proposes that local authorities become "housing delivery enablers" working in partnership with businesses, registered providers and their local residents to build high quality and affordable housing.

Under the coalition government, local authorities have had control of their rental income and assets to boost housing supply alongside new limited borrowing powers which has led to the largest increase in housing development by local authorities since the late 1980's. There is however, the political consensus that more can be done to further increase housing supply.

Local authority led redevelopment is appealing as it can focus less on bottom line profit and more on achieving high standards of design, concentrate on a greater mix of flats and family homes and bring forward the development of smaller schemes. It may also be possible for local authorities to give greater participation to local residents in the design and layout of new schemes and priority on sales or lettings.

Some local authorities are keen to develop new stock and utilise any profits or new income streams to help supplement ever diminishing local authority budgets or to reinvest in further redevelopment.

The London Borough of Sutton and Sheffield City Council have announced programmes of housing development (in the case of Sheffield City Council redevelopment is already under way through the Sheffield Housing Company). Many other local authorities are at various stages of consultation with a view to introducing their own programmes.

The authors of the report are determined to show that new housing "can be delivered through collaboration between public and private sector partners and market-supported solutions".

Past experience shows that where such partnerships are structured correctly it can unlock significant regeneration opportunities. The redevelopment of the Earls Court area (a joint venture entered into between Capital and Counties and Transport for London) is just one example of such a partnership.

House builders and registered providers have also partnered with a view to maximising development prospects. Barratt Homes and London & Quadrant Housing have jointly acquired a number of high profile London sites including a scheme in the Nine Elms opportunity area.

The introduction of local authority regeneration companies will be a welcome addition. It is important however that the burden to make up any shortfall left by the private sector is not placed squarely on the shoulders of the local authorities.

Local authorities have started building again but they lack expertise and confidence to deliver the sort of unit numbers necessary to meet current housing needs. Unfortunately the report does not provide clear guidance to local authorities as to how best to develop their skills to contribute to housing development in their areas. One of the reports recommendations is for the government to set up a housing and finance institute to act as a consultancy service where businesses and local authorities can improve the way they work together. Considering the extent of government budget cuts necessary to balance the books it is unlikely that additional funds will be given to resource a further layer of bureaucracy.

Opponents of the initiative will query whether local authorities should be given greater powers to borrow and build and whether this role is compatible with its position:

1) as a representative of the views of the local community and the risk that some legitimate concerns are overlooked to achieve greater profits or wider regeneration;

2) as a significant landholder and the risk of abuse of its land bank in the pursuit of additional income streams; and

3) as planning officials and whether local authority led schemes are subjected to the same level of scrutiny as other schemes.

There have been a number of reports on the state of housing over the last decade and sadly very few of their findings have made a material impact on the delivery of new housing. It is important that steps are taken to support local authority led development and create a legitimate alternative to private sector development to help ease the twin concerns of a housing shortage and genuine house price affordability.