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Councils put house building above upkeep as rent cut looms

new council housing
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England’s largest council landlords are prioritising house building over maintenance projects as government policies cut into their income from rents

This is the chief finding of analysis by the AJ’s sister title Local Government Chronicle (LGC) of housing plans from the 13 largest authorities that still own and manage homes.

The prioritisation is a response to a series of government policies that have diminished and threaten council resources.

More than £450million of income will be wiped from the business plans of the analysed authorities by the four-year social rent cut, announced by the chancellor last year, the analysis found.

It also shows that authorites aimed to make savings by trimming back-office costs and maintenance or repairs budgets and pushing back planned major works.

LGC’s finding come after council lobby groups warned plans for 20,000 homes would be shelved because of the rent cut.

None of the plans which were analysed proposed reducing house building programmes.

Southwark Council, which stands to lose £62.5million by 2020, is pressing ahead with plans to build 11,000 new homes over 30 years.

Richard Livingstone, the Labour authority’s cabinet member for housing, said there was ‘no threat or danger’ to plans to build the first 1,500 homes by 2018.

’I don’t think the rent reduction policy puts [the council’s housebuilding programme] at risk directly,’ he said.

‘What it gives us problems about is the maintenance of our current stock and getting tenants the service they need.’

Livingstone said savings over the next four years would come from back-office job losses, cheaper repairs contracts, reducing debt repayments, and slowing down the rate at which improvement works are carried out.

For example, a programme to upgrade kitchens and bathrooms will take eight years instead of five.

Sheffield Council on 3 February approved a plan under which a programme to build 1,000 new homes by 2020 “will be maintained”.

Its council papers said it was ’increasingly important because the number of social rented homes in the city will now reduce more quickly’ as a result of the sale of vacant high value housing to fund the extended right-to-buy.

The council plans to allow ‘some slippage’ to its £50million-a-year investment programme to plug the hole left by an annual loss of £27million by the end of the decade.

Sandwel Council plans to build more than 100 homes.

Its deputy leader Steve Eling said it would borrow to help bridge the gap left by the loss of £33m in rental income by 2020.

’That will enable us to keep the programme running but that’s only a short-term fix and the judgement day still arrives in 2021 when we would have to significantly scale back investment into existing housing stock or building new stock,’ Eling added.

Leicester City Council faces a cumulative loss of income worth £27.3m by 2020. However, it is planning to ring-fence £1million to build up to 20 homes next year with savings instead coming from maintenance and repairs budgets.

Newcastle and Camden Councils, which each need to find savings of about £4million next year, are also planning cuts to maintenance budgets.

Matthew Warburton, policy adviser at the Association of Retained Council Housing, said most properties had been brought up to the official decent homes standard in recent years.

This meant councils could afford to focus savings on maintenance and repairs budgets.

However, he warned this approach was not sustainable in the long term.

‘Existing maintenance and repairs will be met but [councils] won’t be building up adequate funds for the investment that needs to take place in 10 years’ time,’ Warburton told LGC.

A spokesman for the Local Government Association said LGC’s research showed councils were ‘doing what they can to adapt to funding pressures in a way that protects their investment plans’.

However, he warned that the cut to social housing, coupled with proposals contained in the Housing & Planning Bill, would hamper councils from being able to invest in new housing in the long term.

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