Review of council housing finance: Terms of Reference

This page contains the text of the Terms of Reference for the review of council housing finance, jointly issued by Communities and Local Government and HM Treasury on 28 April 2008.

1. The review was announced in a written statement to the House of Commons on 12 December 2007. It will be a joint review between Communities and Local Government and HM Treasury.

2. The review will have regard to wider Government policy that is material to the outcomes of the review: tenant aspirations and empowerment; the role of OFTenant; incentives to work; Housing Benefit policy; and fiscal policy. It will have regard to the impact that social housing has on other policy areas such as a contribution to the reduction in child poverty, regeneration and health of citizens.

3. The aim of the review is to work towards a solution that allows a long term sustainable system for financing council housing to be put in place.

Purpose of the Review

4. To develop a sustainable, long term system for financing council housing, one that is consistent with wider housing policy, including the establishment of a regulator of social housing.

5. Any new proposals must conform to the following conditions:

fairness and affordability for both tenants and taxpayers
transparency, giving a clear and accurate picture of the balance of support from local and central government
agreed minimum standards of service and accommodation.
social rents can provide a platform for social and economic mobility to tenants
landlords will continue to improve the quality and efficiency of services
government is not exposed to unacceptable fiscal risks
there will be more certainty and less volatility in the funding of council housing

Guiding Principles

6. The review will be underpinned by a set of principles consistent with wider Government policy on Central Government's engagement with local authorities and the commitment to improving the quality of life in local communities and better public services through the new local performance framework. We will need to take full account of the renewed emphasis on empowering citizens (including social tenants) through their meaningful engagement in the design and delivery of services, as people want a clear voice in how services are provided: they want to live in strong and resilient communities and they want their public spaces and buildings to express their pride in those communities.

7. We will also be mindful of our responses to the Cave Review and Hills Report and the current policy on the delivery of Decent Homes.

8. The principles are:

a) tenant involvement in local decision-making about the homes in which they live should be strengthened, with greater choice and mobility introduced into the system

b) standards and services at similar costs should be provided to all tenants regardless of which landlord (Local Authority or Housing Association) owns the property

c) similar properties should have similar rents regardless of landlord and that we should work towards achieving this in a timescale which maintains affordability for tenants

d) were appropriate, the system should allow more flexibility and greater devolution to the local level, supported by some degree of control and appropriate safeguards

e) the system of funding council houses should not work against the broader policy of helping more tenants into work

f) local authorities will continue to be landlords

g) there will be a single cross-domain regulator

h) the system should enable landlords to deliver improved efficiency and cost effectiveness in services

i) to introduce greater transparency into the system and reduce administrative burden where possible

Remit

9. To inform the annual Housing Revenue Account (HRA) subsidy determinations in the remaining two years of the current spending period.

10. To inform a policy framework for rents and standards for the regulator of social housing.

11. To consider options for the future of the subsidy system including rents policy and to inform the next spending review.

12. To commission research to support the review.

Broad scope

13. There will be five work-streams in the review: Four will cover the detail of issues in each area, as exemplified below, and an overarching work-stream will ensure integrity across the piece and that the review takes full account of other interdependent policies.

a) Costs and standards for social housing could take into account:

minimum standards and services that tenants should expect
potential to link service delivery and what tenants pay
maintaining decent homes and any future physical and/or other standards
costs of delivering standards and services
can formulae ever deliver the right amount of money to the right places
the role of the regulator in standard setting

b) Within the principle that similar rents will be charged for similar properties the work on rents could take into account:

tenant influence over rent levels in relation to costs/standards of service delivered
separation of rents and service charges
effectiveness of the current rent formulae
the process of rent restructuring and the timescale for convergence; convergence and achieving common rents across Registered Social Landlords (RSLs) and Local Authorities (LAs)
rent levels and utilisation of surplus rental income.

c) Mechanisms for delivering funding could take into account:

devolution to Local Authorities and possible contractual relationship with LAs
how to exercise influence over devolved system
utilisation of any surpluses generated from rental income
handling of historic debt
for a national system - improved formulae/reduced complexity/less volatility
more effective asset management

d) The current rules governing a local authority's HRA could take into account:

the rules and regulations covering the HRA (eg use of the Major Repairs Reserve) and any other accounting treatment issues and whether these have any inhibiting effect on the efficient running of services
operation of HRA ring-fence and extent to which this should fund improvements to homes and/or estates

e) A fifth work-stream will ensure the strategic integrity of the review

14. The review will not consider the following areas:

means testing on rents
different rents policy for LAs and RSLs
potential housing benefit policy changes
changing the sub-market basis of social housing rents
changes to the role of OFTenant

Governance and accountability

15. The review will be led jointly by Communities and Local Government and HM Treasury, reporting to Caroline Flint, Minister for Housing and Planning at Communities and Local government and Yvette Cooper, Chief Secretary to HM Treasury.

16. The review will be steered by a Programme Board the members of which will include senior officials from Communities and Local Government, HM Treasury and the Department for Work and Pensions. The Board will meet monthly and report into established Communities and Local Government and HM Treasury governance mechanisms.

17. Other government departments - the Department for Children, Schools and Families, Department of Health and the Department for the Environment, Food and Rural Affairs - will be engaged as appropriate.

18. Stakeholders will be invited to contribute to the review at regular intervals during the process.

Reporting

19. The Review is due to report to Ministers in the spring of 2009, setting out options for the subsidy system, including proposals for changes to rent policy and to inform the next spending review. A formal consultation will follow the review.

20. We called on social housing tenants to complete an on-line questionnaire - Tenant Feedback: Review of Council Housing Finance - on the key issues of the review. The answers to this will be vital in ensuring the views of tenants are represented in the outcomes of the review. The questionnaire closed on 31 October 2008.