Considering the possibility of reactivating your Housing Revenue Account?
In the realm of housing finance and local government operations, a question that has been resurfacing is whether local authorities should reopen their Housing Revenue Accounts (HRAs) following the sale of their housing stock. This article explores the pros and cons of this decision, as well as alternative solutions available.
The Advantages of Reopening an HRA
The primary advantage of reopening an HRA lies in the ability for local authorities to regain control over providing affordable housing. By owning and managing their housing stock once more, councils can support social housing objectives and address local housing needs directly.
Another advantage is the potential to generate rental income, which can be reinvested in housing maintenance, improvements, or new housing developments. This income source offers a means to fund future projects and enhance the quality of council housing.
Greater flexibility in housing policy implementation is another advantage. With an HRA, councils can tailor their responses to local housing priorities, allowing for more effective and targeted solutions. Additionally, the long-term asset building potential of an HRA supports community regeneration and stability.
The Challenges of Reopening an HRA
However, reopening an HRA is not without its challenges. The most significant challenge is the substantial financial investment required to acquire or build new housing stock. This investment may strain local authority budgets and lead to increased financial risks related to ongoing maintenance, management, and potential rent arrears.
Administrative and operational overheads also rise when authorities manage their housing stock directly, after a period of outsourcing or selling. Furthermore, capital constraints and borrowing limits imposed by government rules may restrict the ability of councils to expand their housing stock quickly.
Market exposure and economic volatility can also affect the value and demand for council housing, adding another layer of risk.
Alternative Solutions
Alternative solutions to using an HRA include entering into an arrangement with an existing housing provider, establishing a new housing provider, or setting up wholly-owned companies to own and operate sub-market housing. Each option comes with its own set of potential risks and rewards, and the choice will depend on the individual circumstances of each local authority.
Making the Decision
In summary, reopening an HRA offers local authorities greater control and income potential but demands significant resources and risk management efforts. The decision should weigh long-term social and financial goals against fiscal capacity and market conditions.
This article was first published on our organisation's website and featured in the latest CT Brief - Issue 71. For a deeper understanding of this topic, we recommend reading the interview with the Housing Ombudsman and the feature on the outgoing CEO of Clanmil.
It is important to note that there is no one-size-fits-all answer to the question of whether or not to reopen an HRA; the decision will vary depending on the unique circumstances of each local authority.
As the pressures on councils regarding high-cost temporary accommodation, homelessness needs, and budgets for children's services and adult social care continue to grow, a joined-up, housing-led solution could be seen as an attractive proposition.
However, there is a trend for acquisitions and mergers among housing associations to achieve economies of scale, potentially leading to a loss of control over social housing for local authorities. This is an important factor to consider when making the decision to reopen an HRA or consider alternatives.
Ultimately, the decision to reopen an HRA or consider alternatives will depend on the specific set of circumstances for each local authority.
The local government industry could benefit from seeking partnerships with educational-and-self-development institutions to enhance the business acumen and strategic decision-making skills of its officials, given the complex financial considerations involved in reopening Housing Revenue Accounts (HRAs).
By fostering a collaborative relationship between local authorities and the finance sector, councils may gain access to expertise and resources that could help them navigate the risks and challenges associated with reopening HRAs, ensuring a stable and sustainable housing market.
Moreover, engaging with the business community could open avenues for innovative solutions to housing issues, such as public-private partnerships and impact investments, which could provide additional funds for local affordable housing initiatives.
