Cllr Kathy Smethers is a councillor in Eastborne.
Affordable housing is an issue which is set to govern politics for this parliament and into the next. How do we produce enough homes to fulfill the growing requirements of our nation? Local councils have a role to play in this because they could fill a gap in the market, providing affordable homes that the private sector considers unprofitable.
Developers could be encouraged to pay a levy set by a separate body instead of integrating affordable homes within their projects. This deal would mean more projects of exclusively ‘market value’ housing are viable – with developers being able to maximise the profit on their project.
The levy would be paid to the Housing Revenue Account (HRA) of the local council and earmarked for building affordable housing only (not for use in other building or building maintenance).
None of the revenue from right-to-buy should be paid to central Government. Instead it should all be paid to councils’ HRAs and earmarked for building affordable housing only.
Councils could earn a profit from developing ‘market-value’ projects within their local area, selecting project type – social housing, shared ownership, help-to-buy, premium – appropriate to the values of available land so an expensive house is built on profitable land and a more affordable house on land of less value. This would mean that profit from a market value project could be maximised and then used to pay for social housing.
Councils should be allowed to build ‘market-value’ houses, using other revenue or loans, to sell to make profit. Capital would be retained in this business activity but the profit paid into the council’s HRA.
Tax on profits made by the Council’s ‘market-value’ developments could be used by central Government to subsidise affordable housing projects within Councils where building affordable housing is particularly challenging – such councils may apply for grants from Central Government. Central Government should earmark this tax for that use only.
Local authorities could earn revenue by sharing expertise of this model of project delivery with smaller, or less able, authorities – or with those facing a particularly challenging local housing economy.
Councils would be able to work with smaller developers in the building sector on these projects and to stipulate the creation of apprenticeships to create training and jobs for young people in the local area. This would help to provide an answer to the shortage of apprentices in the construction industry.
As councils must build to a statutory level of quality their houses would be recognised as high quality builds and thus be of greater value and reputation. This would help to increase build quality standards across the market as councils would be competing to sell houses on the open market.
This is a radical change to thinking about money streams in development of affordable housing but the model is self-sustainable and would ensure cuts in central government subsidy do not affect the sustainability of house building. It would also not require radical changes in the law.