Housing plans herald new era for local councils

July 16, 2008


The New Local Government Network has said that the Housing Green Paper will put local authorities back at the heart of house building for the first time in a generation. The independent think tank said that the plans rightly recognised the crucial role that councils could perform in building social housing, helping first-time buyers and supporting an unstable housing market.

Last month NLGN published its Good House Keeping? report which called for councils to step in with publicly-backed lower rate mortgages and other financial support packages to help home owners at risk of repossession. NLGN is delighted that the Green Paper will take forward these proposals for local authorities to offer mortgage support and finance, measures which could help tens of thousands of people retain their homes and help to stabilise the housing market.

Local authorities are able to borrow money at a lower “prudential borrowing” rate than commercial lenders and could therefore offer lower interest mortgages for homeowners. Other support measures could include councils buying properties under threat of repossessions and leasing them back to their owners. Councils could also target emergency loan finance to households most under threat of losing their homes because of the credit crunch.

Proposals to create new Local Housing Companies – also recommended in Good House Keeping? – were also announced. This will allow local authorities to be at the centre of building new social housing and creating new partnerships with other local stakeholders to help increase access to social housing for the 4 million people currently waiting to be houses.

The Green Paper also backs the NLGN recommendation to allow local authorities in conjunction with the Housing Corporation to purchase unsold housing stock from developers and turn it in to social housing.

NLGN Director Chris Leslie said:

“In the current economic climate where households are struggling to afford mortgage costs and lenders have vastly reduced the number of financial packages available, local authority mortgages could help to plug the gap in the market. The move towards assessing whether councils can play a greater role in providing mortgages is bold and ambitious, but also based on a sound economic rationale. No one wants to go back to the repossession levels of the 1990s, and allowing public authorities such as local councils to offer mortgage capital could result in thousands of families avoiding the misery of losing their homes. It could also ensure that whole communities are not decimated by a price collapse from a flood of properties depressing the local market and jeopardising regeneration. Councils should use their borrowing powers and act for the well-being of their communities, helping neighbourhoods to weather the current housing storm. Public sector mortgages could even allow councils to make a long-term surplus for the benefit of the council tax payer.”

“Local councils have a proud tradition of building and maintaining social housing for their communities but sadly this has dwindled in recent years, with 239 houses built last year compared to 173,000 in 1970. This new Green Paper goes a long way to redressing this balance and giving councils greater freedom to begin investing in local housing afresh.”

“The Green Paper is explicitly pro-council and pro-local government and as such should be widely praised as a shot in the arm for localism.”


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