Housing companies criticised for focus on revenues

Delivery: Should housing companies aim for raising revenues or focus on providing homes?

Councils should not establish standalone housing companies purely as a cash cow, according to a regeneration director reacting to figures showing almost half of councils have either created or are considering setting up such a vehicle.

A survey of 112 lower and single tier councils by research firm 3Fox International found that 12% of England’s local authorities have already set up a housing company and 34% are actively considering doing so.

But Pat Hayes, executive director of regeneration and housing at the London Borough of Ealing, questioned whether housing companies were an appropriate way of raising money to support other services.

He said: “I am surprised so many authorities have set up housing companies or are thinking about it,” he said.

“We set ours up to address a specific housing issue; namely, the lack of good-quality, institutionally-funded, market-price, rental accommodation.

“I am slightly concerned that some authorities may see housing companies simply as a way of generating a financial surplus, rather than a means of intervening in the housing market to catalyse the delivery of intermediate price accommodation.”

The council’s housing company, Broadway Living, is planning on building 1,500 new homes in the coming five years.

Jeremy Grint, divisional director of regeneration and economic development at Barking and Dagenham, said: “For us one of the contributing reasons for setting up a housing company was the potentially beneficial effect to regeneration in our borough.”

His council’s housing company, Reside, has so far provided 477 new homes on two sites so far.

The survey found that a third of councils saw revenue generation as the main reason for setting up a housing company, with 61% citing the need to provide long-term housing solutions.

Meanwhile, London Borough of Southwark has revealed more details of its housing company, Southwark Housing Company (SHC), which it recently created.

Duncan Whitfield, director of finance and corporate services at the council, is one of three directors of the new company.

SHC will be able to contribute towards the delivery of council properties at council rent, intermediate housing products, as well as market rent housing in order to provide cross-subsidy within overall schemes.

A report by council officers said: “While the general principles of the finances of developing schemes in SHC have been considered in order to show that developing in SHC is viable, it is considered that the best approach is to look at individual schemes on a case by case basis and then decide whether it is appropriate to develop it within the housing revenue account, general fund or SHC.”

The council said it would develop intermediate level housing products to cross-subsidise the housing investment programme.