Reform of Housing Revenue Account - the Landlord Account

http://www.londoncouncils.gov.uk

Reform of the Housing Revenue Account Subsidy System

From April 2012, the system of local authority housing finance (known as the housing revenue account, or HRA) will undergo the most significant and far reaching change since the war, and will be devolved to local authorities to manage themselves. Authorities which own housing stock will gain full control of their housing income and expenditure and be able to make their own decisions on how and in what way they invest in tenants' homes. If they wish, they will even be able to build new homes using surplus rental income.

The reform of the HRA has been a long process. The previous Labour Government consulted on HRA devolution and moved towards it, but did not implement it. The Coalition Government confirmed in February 2011 that it was going ahead with HRA devolution from April 2012, a move for which there was broad cross-party and sector support.

In return for being able to manage their own HRAs, the 171 stock-owning local authorities have been allocated a share of the national housing debt, totalling some £28bn. London's boroughs have fared relatively well in this settlement, being allocated £5.5bn of debt, some 25% less than estimated was originally owed.

In addition, local authorities have had a ceiling placed on their ability to borrow against the rental income that they will now receive in full. This is because local authority borrowing counts as part of the Public Sector Borrowing Requirement (PSBR) and thus counts as part of the national debt, which the Government is keen to reduce.

--------------------------

Chapter 3 of The Localism Act 2011 HERE, abolishes the Housing Revenue Account Subsidy system. This takes affect from April 2012.

According to a recent council report HERE (11. Debt Management) Camden Councils share of the settlement debt will be £518m. This is bad news for tenants who through above inflation rent and service charge increases will have to foot the bill. The council recently set the increase of rents from April 2012 at 8%.

In time council housing rents are expected to come into line with housing association rents.

Revenue funds can be spent on capital expenditure.

The reason for the new system is due to the "Daylight Robbery Campaign" - lobbying by some unions , council tenant reps, MP's and clrs, under the "defend council housing" banner who object to the socialist way of distribution as the rents from better of tenants not in receipt of housing benefit have been used (distributed) across the country to give financial help to poorer tenants via housing benefit. Ref HOC Research Paper HERE.

Contrary to popular myth, housing benefit (rent rebate) does not in all cases cover the full cost of rent or service charges so that when rents and services charges are increased the cost is incurred by the tenant.