In the November issue of Public Finance the cover feature “Building Outside the Box” and the subsequent article on local authority housing companies made interesting reading for us here at Arlingclose.
Although exact numbers are not quoted the article suggests that more than 40 English local authorities have either set up or are in the process of setting up housing companies with the aim of building homes for market sale, market rent, shared ownership and below market rent and it is expected that the number of companies will double over the next few years.
An interesting comment made in the article is that “some councils are using companies to build social housing outside of the Housing Revenue Account (HRA)” this is an issue that we have been concerned about for some time and has been the subject of a number of updates sent to our clients highlighting the risks of providing housing through a wholly owned subsidiary company structure (WOC).
The reasons stated for providing housing through a WOC is that tenants do not qualify for the right-to-buy as they are not considered as being council tenants but instead tenants of the WOC. Although the legal expert quoted in the article points out that avoiding the right-to-buy or HRA accounting issues is "not a legitimate reason for becoming a company” it has long been our view that the only reason why a local authority would want to provide housing through a WOC is for exactly these reasons.
In a previous housing Insight we outlined some of the issues that we are concerned about regarding the provision of housing through a WOC and these concerns remain valid. The recent change in Housing Minister may alter the Government’s stance on the role of WOC’s in the national and local housing economy but until policy is clear on these issues the risks of challenge over the use of a WOC outweigh the potential rewards and there are other ways of delivering housing which Arlingclose can offer as part of its Housing Toolkit range of services.