Council Housing Finance Reform Headlines, Issues and Impacts on London West London Housing Partnership 16 February 2011

The Headlines A dismantling of the Housing Revenue Account Subsidy System and a move to Self-Financing from April 2012 Facilitated by one-off redistribution of £28bn of housing debt A discount rate of 6.5 per cent Uplifts in allowances in line with previously commissioned research £116m extra funding each year for disabled adaptations Continued subsidy for PFI schemes currently funded through HRA An aggregate debt cap linked to the opening debt level under self-financing Continued retention of 75 per cent RTB receipts by HMT Settlement imposed by statute rather than on a voluntary basis Right for Secretary of State to reopen deal if terms change

Financial Impacts on London £2 billion (26 per cent) reduction in London’s Housing Debt from £7.5 billion to £5.5 billion £10 billion (94 per cent) increase in Rest of England’s Housing Debt from £9.9 billion to £19.2 billion £1.6 billion total (£57 million average) in London borough ‘borrowing headroom’ £2 billion total (£14 million average) in Rest of England local authority ‘borrowing headroom’ £1.2 billion total (£41 million average) Decent Homes backlog in London £1 billion total (£7.5 million average) Decent Homes backlog in Rest of England

Potential Response Clear concerns regarding: However… Debt cap enshrined in legislation Ability of Secretary of State to reopen deal at a later date The principle of HMT retaining proceeds of Right to Buy sales Sustainability of proposals at an individual borough level However… At a regional level London does well given policy constraints Proposals end the subsidy system and end negative subsidy transfer Allowance uplifts in London (16 per cent) are better than average (14 per cent) Self-financing is the best and most workable deal for council housing finance and it looks like being delivered.

Emerging Issues Debt Decent Homes New Supply Interest rate risk, timing of debt transfer Possibility of a London Housing Bond Decent Homes Future investment rounds? Despite headroom some boroughs still fall short of resource New Supply Interaction with Affordable Rent model Moving towards a tradeable HRA? Freedom on local rents, tensions with DWP