Blog: why some councils are reluctant to set up housing companies

Wed 14 October 2015, 9:37 am

In recent times, some councils have decided to set up their own housing company to speed up housebuilding and to generate revenue for public spending.

My last blog was written while collating and analysing the outcomes of a survey which aimed to discover how many local authorities are setting up housing companies. According to my survey, 12% of councils had already set one up at the time of compiling the data and 34% said they were considering doing so.

But for this blog, I would like to explore something not discussed in the report – why local authorities choose NOT to set up a housing company.

Setting up a housing company might look like an attractive option, but some local authorities have provided useful insights as to why it might not work in all circumstances. A common reason is that the expected revenue is not high enough to make a business case for such a company. This is the case for some councils controlling areas where house prices are very low. Councils which have land within flood-prone areas are reluctant as well – ensuring each home is resilient to flooding increases the cost to a point where the housing company option is implausible.

Uncertainty also arises from a lack of clarity over the government’s position. Housing minister, Brendon Lewis, has previously stated he would take measures against council-owned housing companies that circumvent Right to Buy legislation. No measures have been taken as yet, but it has made some councils anxious to proceed.

For some, there is a simply a lack of suitable land. There are local authorities who simply do not own very much – and with a lack of space to develop, they feel that there is little point in setting up such a body. Other councils have gone down a different route, transferring their housing stock to a housing association.

But even though a number of local authorities have dismissed the option, research at 3Fox International has concluded that a significant number are actively interested.

3Fox organises workshops on this topic, where councils which have already set up a company share their reasons for doing so and discuss best practice.

If you are interested in attending a workshop, contact Sophie Gosling: Sophie@3foxinternational.com.

Read the survey report.

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