Failing quango Homes England causing a hidden council house crisis, Burnham told

Standing outside Downing Street, hours after visiting a homeless shelter, Andy Burnham kickstarted his premiership with an impassioned pledge to end rough sleeping and launch “the biggest council house building programme since the post-war period.” It is the promise that could come to define his time in Downing Street. But some of the evidence suggests it could fail – or worse, backfire. Burnham favours redirecting Sir Keir Starmer’s entire £39bn Social and Affordable Housing Programme (SAHP) into social rent: the tenure most affordable to tenants and the most expensive to build, according to reports from the campaign trail. Whitehall departments are expected to be told to sell land at a discount for new developments. His post-war declaration is being taken at “face value” by councils. They now expect a greater chunk of the affordable housing budget after being “bottom of the pile” when it comes to accessing funding from Homes England, the Government’s main housing agency. Homes England’s programme is currently on hold while he decides how to proceed, and his Housing Secretary, Angela Rayner, has just given his ambition a reality check. “There’s a huge gulf between post-war and where we are today,” she told BBC Radio 5 Live on Thursday when questioned about council housing. “The bar is really low.” The i Paper’s analysis of the funding, debt and delivery structures underpinning council housing suggests Burnham’s ambition collides with a system built, over the past decade, to work against him. The collapse in capacity Local authorities in England completed some 4,000 social rented homes last year. In the 1960s, the average was 120,000, according to government figures. Registered providers – housing associations and other approved landlords – can borrow from the National Housing Bank, an arm of Homes England, at interest rates of just 0.1 per cent. Councils, shut out of that scheme, are instead offered rates of around 5 per cent by the Treasury. A Homes England spokesperson said the Bank’s role “is to deploy capital on a commercial basis to support housing delivery,” and that any investment must operate within government, regulatory and accounting frameworks. “The fact that registered providers get lower interest rate loans than local authorities is really galling to them,” says Professor Janice Morphet of University College London, who has scrutinised hundreds of council papers and carried out in-depth interviews with 90 senior council housing officials in recent months. “It is top of the pops for their anger.” Frozen out at Homes England Burnham has been warned that Homes England will have to be “completely upended” if his council housing drive is to succeed, according to Morphet. Her research has found that an overwhelming majority – 95 per cent – of local authorities are gearing up to build homes but have found themselves “bottom of the pile” when it comes to accessing funding from Homes England. Most government grants for affordable housing, she says, go to private developers and housing associations instead. Councils told her that Homes England also denies them the long-term funding programmes routinely offered to private developers and major housing associations – funding they need to rebuild the house-building skills they lost after the post-war boom. Homes England, they said, would only agree funding scheme by scheme, and was “very slow” making decisions. “London boroughs now build thousands of council homes each year after being offered long-term deals by the London Mayor,” Morphet told The i Paper. “If Homes England did the same, local authorities outside the capital could potentially deliver tens of thousands more.” Morphet added: “Homes England’s attitude towards local authorities has got to change considerably. “Since its recent restructuring, councils haven’t been able to find a way to contact them at all. It needs to be completely upended.” Angela Rayner has been appointed as Housing Secretary and has given his council homes ambition a reality check (Photo: Chris Radburn – Pool/Getty) A leading think-tank in this space, which Andy Burnham advised while Mayor of Greater Manchester, is calling on Burnham’s No 10 North and Rayner to break up Homes England for “blocking” council house building. Think tank Re:State, which describes itself as independent and “non-party”, says centralised Government quangos like Homes England lack the “bandwidth” to help the number of councils which now want to build homes. “All of its decisions go up the chain to its central office,” says its Re:State policy director Simon Kaye. “But there are hundreds of councils and while they are probably working as fast as they can, bottlenecks slow down decisions,” he adds. “They are inadvertently blocking councils’ ambitions to build homes. It should be the business of No 10 North to push for the break-up of Homes England,” Kaye adds. A Homes England spokesperson said it supports hundreds of local authorities and mayors in managing “significant public investment” and building homes “at scale,” adding that local authorities are “a vital partner” in delivering new homes – pointing to its regional operating model and “deep investment” in long-term partnerships with councils and mayors. The debt trap Underneath all of this sits £31.8bn of council debt, costing local authorities £1bn a year in interest payments to the Treasury, according to analysis by the estate agency Savills – a leading authority on council housing finance. If that debt were cancelled, local authorities could build up to 284,000 new social rent homes. John Perry, senior policy adviser at the Chartered Institute of Housing, says that debt is the single biggest obstacle. In practice, that means the Treasury forgiving some or all of what councils owe on their housing budgets – potentially in exchange for firm commitments from each council on how many homes they’d build in return. “Some significant alleviation of debt is required,” he says, “possibly in return for agreements with each council that alleviation will result in promised levels of new build.” Even with debt relief, councils would still need to borrow to build. And under current rules they’re excluded from the National Housing Bank’s cut-price loans altogether. The gamble This is where Burnham’s ambition carries real risk. Any reorientation of the entire £39bn programme towards social rent – the most expensive form of affordable housing to deliver – will require new money on top of what’s already committed. Without it, according to Perry, the total number of affordable homes built could fall, not rise, before the next election. “To orientate the SAHP more strongly to social rent will require extra funding – or else it might reduce numbers overall,” he says. Burnham favours redirecting Sir Keir Starmer’s entire £39bn Social and Affordable Housing Programme (SAHP) into social rent (Photo: Marcin Nowak/Getty) Under current plans, the £39bn programme aims to deliver 300,000 different affordable products but with at least 180,000 for social rent. Following hikes in building costs, recent industry analysis by Homes For People We Need – a group of major affordable housing developers and landlords – found each social rented home now requires on average £209,260 of Government funding. This total would fall significantly if Burnham pushes through with his plan to focus on social rent. His housing ministry is now describing his plan to divert more cash to councils and social rent as “pure speculation”. What it would take But Paul Harvey, vice chair of the Local Councils Network, says delivering on Burnham’s campaign trail pledge – which he takes at “face value” – will mean a “serious financial commitment”. “Social housing is more expensive, but of all the affordable housing products it is the key one for solving the housing crisis,” he says. “Councils are the best vehicles to deliver affordable housing, but it will require central government to give up their powers to us, and this will be a really hard thing to do. The Government is also going to have to let councils step into the SAHP so that we can prove we can deliver – and then go back for more.” In the meantime, with the whole programme on hold while the new Prime Minister weighs up his options, the supply of new affordable homes has stalled. Some 17,000 new affordable homes are at risk because of delays to the SAHP, the Government was warned in June by the National Housing Federation, which represents housing associations. Any further delays while Burnham’s administration finalises its plans will make the delivery of affordable homes even more difficult, according to the Land, Planning and Development Federation, an umbrella body for the development trade. “We will be urging the Prime Minister to expedite decisions on the current Social and Affordable Housing Programme, because providers are being held up,” says Perry.