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City council's conundrum
In recent weeks Oxford City Council has been seeking to borrow £200m — a massive sum at any time, but scarcely believable in the current climate of austerity and cost-cutting.
But it turns out the Town Hall is having to saddle itself with extra debt in order to gain control of its own council housing stock.
Explaining the borrowing to me, the city council’s executive director of regeneration and housing seemed remarkably relaxed.
For it all came down to a shake-up in council house funding, apparently.
This one-off payment would mean that in future the council could keep the money it collects from council house rents, instead of having to hand over a chunk of its rental income to central government each year.
The city council, however, was feeling altogether less comfortable with the arrangement this week.
For it will be taking on the debt just as it faces the prospect of having to sell many of its council homes as result of the Government’s new right-to-buy scheme.
David Cameron is proposing to tempt tenants to buy their council houses by offering them discounts of up to £75,000.
As reported in The Oxford Times last week, council house sales in Oxford had all but dried up — just two sold last year — with the current local right-to-buy scheme offering a “miserly” £16,000 discount.
The new inducement to buy looks set to put council house sales once again at the top of the political agenda, returning us to the days of Margaret Thatcher’s flagship scheme.
Mr Cameron says it will unlock the aspirations of a new generation of house buyers. The city council says it will increase the chronic shortage of affordable rented family housing in the city, with a serious impact on homelessness.
And it will also see the city being forced by central government to take on a massive debt for something they look like having to sell on the cheap, according to the city council’s board member for housing, Dr Joe McManners.
He said: “We are quite appalled because we are taking on £200m of debt at the council, which we are obliged to do in order to ‘buy ourselves out’ of giving tenants’ rent to the Government. Now at the same time the Government is forcing us to sell off the city’s council housing on the cheap.
“We do not want to borrow money to build new houses on the back of a rental income, only to find them sold off, so we can’t pay the money back.”
The council is faced with a £200m payback figure because it has maintained a sizable council housing stock, owning some 7,800 homes, that brings in a sizable income.
Under the hugely complicated existing arrangements, Oxford City Council has to hand over about £13m of its rental income to central government, which is then distributed to less well-off councils.
The council house sale of the new century also comes just as the council is embarking on a new era of affordable home building.
With Oxford the least affordable city in the UK outside parts of London, plans are in place to develop over 100 new council homes in the next few years, with hundreds of affordable homes also set to be created as part of the Barton West development, to create “a vibrant new community” on the north side of the ring road.
Housing Minister Grant Shapps insists that the new discount should see no reduction in affordable house building — with money from council house sales going back into new house building.
He said: “We are determined to maintain the number of affordable homes for rent — so for the first time, homes that are sold will be replaced by new affordable homes, helping councils meet housing need and get the nation building again.”
But Dr McManners fears that there would be insufficient money to pay for the building of new homes “on-a-like-for-like basis”.
And even if there were, the lack of available land for building in Oxford would make this impossible in any case.
The Town Hall says the Government has also confirmed that new council homes would not need to be built in the same place.
So, council homes sold off in Oxford could be replaced by new council houses built in, say, Newcastle, or some other cheaper area of England.
Council house numbers nationally might stay the same but it would be little consolation for families looking for council homes in Oxford.
Concern about how the figures will stack up have also been raised by David Parsons, the chairman of the Local Government Association’s environment and housing board.
He said: “A centralised right-to-buy cap of £75,000 fails to take into account local housing demand and the cost of building new homes.
“This means that in some areas the one-for-one replacement of homes that the Government has promised may not actually be delivered.
“While beneficial for tenants wanting to join the housing ladder, the public purse will have suffered because councils will have had to sell houses off at a price lower than needed, to increase take-up of right-to-buy. That delivers poor value for public money at a time when we should be squeezing maximum value from every pound.
“The LGA lobbied for councils to keep 100 per cent of right-to-buy receipts. The Government announcement leaves open that possibility. However, given this can only be used to meet 30 per cent of new build costs, in practice, keeping the receipts may not be possible for many councils.”
So will many people in Oxford be taking advantage of the new scheme from April? The earlier right-to-buy scheme, introduced under the then Prime Minister Mrs Thatcher, which gave substantial discounts to tenants, certainly suggests so.
That led to about half the council’s family housing being sold, amounting to more than 3,550 homes. But Oxford was to be one of three cities where a cap on discounts of £16,000 was imposed.
The move was justified by Oxford’s chronic lack of affordable housing and fears that the council homes were being sold to buy-to-let landlords.
The impact of the cap has been marked, with only 10 council homes having been sold in the last three years. Now Mr Shapps says the time for such “miserly restrictions” on the level of discounts has gone.
From April, tenants who have been in the public sector will qualify to buy their home under the new right-to-buy discount.
To help tenants further, the Government has also announced details of its NewBuy Guarantee scheme, giving would-be buyers access to mortgages, even if they only have a five per cent deposit.
“It’s great news for thousands of tenants who have done well for themselves,” said Mr Shapps.
But the real winners, according to the city council’s ruling Labour group, will be profiteering buy-to-let landlords, who will end up acquiring former council homes, before renting them out to families and students at higher rents.
Newly in debt to the tune of £200m, with an exacerbated shortage of rented family housing, the city council says it would then be left to try to pick up the pieces as already chronic homelessness levels increased.
Whoever the winners turn out to be, the occupants of Oxford Town Hall are certainly not expecting to be among them.