Foundation to Thrive report: how to unlock a council housing revolution

This debt is stopping councils from building social homes.

Councils spend on average 15% of their rental income on HRA debt interest, with some paying more than 100%.⁴ This money could instead be invested in building and maintaining new social rent homes.

The government should cancel all £31.8bn of HRA debt. This would unlock capacity for councils to build over 280,000 social rent homes⁵, generating a net benefit of £141.5 billion to the economy over 60 years.⁴

Crucially, cancelling the debt would have a limited immediate impact on the government’s fiscal rules, as it is money the public sector owes to itself.

HRA debt cancellation will provide the capacity to build council homes, but it will take additional government investment to build them at scale.

Consecutive governments' economic policy has discouraged public-led delivery of social homes for decades. To tackle the housing emergency, the government must drive a change in economic consensus and start treating the loans and grants required to build social housing as an investment rather than a financial burden.

Social housing should be seen as a safe investment. In fact, it makes more financial sense to build than not. The cost of not scaling up delivery to 90,000 social rent homes a year over a decade is quantified in Cebr’s Cost of Inaction report: £64.4 billion in direct costs to the government, alongside £52.4 billion in lost economic benefits, within the first 10 years alone.⁶

The government should bring forward planned spending earmarked for later stages of the Social and Affordable Homes Programme (SAHP) and concentrate it on social rent.

The overall grant in the SAHP should also be increased, to further ramp up investment towards building 90,000 social rent homes a year.

To deliver this, the government would need to change either its fiscal rules around investment or the way it measures debt; both are ambitious asks.

As an interim measure, we propose the government excludes HRA and public corporations from its current measure of debt. This would allow government to loan councils money for building on the same low interest rates they currently only offer to housing associations.

Every day, councils see the financial and human impact of homelessness and bad housing. Across local authorities, there is a real willingness to get building again.

But decades of market-led housing policy have drained the expertise and political will that supported the post-war social housing boom.

To address this, the government should:

• continue to build councils’ in-house resources and capacity for delivery, particularly within planning teams

• introduce a national target for social rent homes

• institute a new delivery compact with local authorities to return to largescale council housebuilding in return for HRA debt removal

• appoint a council housing champion within the Office of the Prime Minister and Cabinet, responsible for coordinating priorities between central and local government.

Additionally, government must align planning policy with local housing need by:

• setting a national minimum requirement of 20% social rent homes on all medium and large developments

• amending the standard method for assessing local housing need so that it considers the number of households experiencing or at risk of homelessness

• supporting councils to recruit and retain more planning staff.

Since the post-war boom in council housebuilding, the value of land has sharply increased. The financial gains have largely flowed to private interests, with public land increasingly used to generate short-term revenues for the state. Since 1980, 1.6 million hectares of public land have been transferred from the public to the private sector, often for a fraction of its potential value.⁷

The General Disposal Consent 2003 continues to encourage councils to prioritise short-term sale receipts over public policy goals.

The government should replace this outdated policy with an ‘optimal use duty’, requiring public landowners to maximise social and economic value from their land, including high levels of social rent housing.

Beyond public land, government should support councils and development corporations to acquire and assemble private land at a fair price.

Land value and property taxation should be reformed to discourage speculative land holding and empty home ownership.

There are over 300,000 long-term empty homes in England – a 49% increase over the last decade.⁸

Councils should be empowered to convert neglected homes in private ownership into good-quality, affordable social homes.

Acquisitions are a relatively rapid, green and cost-effective way for councils to grow their social housing stock, particularly for councils who have not managed or built homes in decades.

To ensure acquisitions are targeted to improve the whole housing system and deliver as many social rent homes as possible, local action must be supported by a policy direction from central government.

The government should:

• set out an ambition in the forthcoming housing strategy to reduce the number of low-income households in expensive and poor quality private rented homes

• launch a dedicated national acquisitions programme with its own funding and guidance for councils to acquire empty and neglected private rented sector homes

• scrap VAT on renovating empty homes for social rent.