Reform of council housing finance (HRA Subsidy Review)

In a written statement on 30 June 2009 the Minister for Housing and Planning announced the conclusions from the joint CLG and HM Treasury review of council housing finance. He indicated that it was the Government's intention to dismantle the current Housing Revenue Account subsidy system and replace it with a localised system of self-financing for all councils.

Communities and Local Government published the consultation document Reform of council housing finance on 21 July 2009 which includes the proposals and describes the steps required to do this and the timescales on which changes could be made.

The reforms would provide more flexibility in finances and more transparency in the operation of the system. This would devolve control from central to local government. In return, it would increase local responsibility and accountability for long term planning, asset management and for meeting the housing needs of local people.

The reforms would remove the need to redistribute revenue nationally whilst continuing to ensure that all councils have sufficient resources. Under these reforms, councils would finance their own businesses from their own rents and revenues, in exchange for a one-off allocation of housing debt.

By freeing councils from the annual funding decisions in the current system, it is expected that councils should be better able to plan long term and to improve the management of their homes, secure greater efficiencies and improve the quality of service to their tenants.

The consultation closed on 27 October 2009 and stakeholder input is currently being examined. We received more than 220 responses and on 16 December 2009 the Minister announced that the responses showed an overwhelming support for the principle of self-financing. He intends to make a further announcement in February 2010 which will confirm the progress that we have made on self-financing and set-out more details of the proposals.

The department is working with colleagues in local government and with experts and practitioners in the professional bodies such as CIPFA, to work through the financial, accounting, technical and practical aspects of self-financing.