This chapter outlines recommendations for councils, the GLA and the government to ensure that the potential of borough building is maximised.

This report has considered the current strained housing context in London – the ways that boroughs are becoming more active in housing delivery, the factors making it difficult for them to build more, and the potential (and need) for greater council involvement. Both the Mayor’s Housing Strategy and the government’s Housing White Paper identified the need for local authorities’ involvement, and this has recently been boosted by the Mayor’s May 2018 announcement of dedicated funds for council housing, including capacity building in the sector. ⁵³ With new councillors arriving at town halls across London and getting to grips with the local consequences of the housing affordability crisis, the time is ripe for a step change.

But how do we move towards a framework that allows councils to deliver at scale?

Recommendations

Setting a clear vision for housing companies

If there are several strategic objectives for wholly-owned companies, councils need to be clear on the hierarchy of priorities, as these objectives will influence the type and scope of housing companies as well as their funding arrangements.

Councils need to set a clear direction for council companies, and articulate the balance between generating returns to sustain other areas of council responsibility and providing affordable housing at lower rents.

For instance, in Barking and Dagenham’s Be First, objectives in terms of tenure mix have been clearly set out from the start. Political leaders should communicate clearly internally and externally about the purpose of wholly-owned companies – whether these are aiming to increase (affordable) housing supply and/or generate a return.

Given the current state of austerity faced by councils, it is understandable that some have focused on generating a return for the General Fund in the medium to long term. However, demographic and cost pressures will continue to put pressure on council services in coming years. ⁵⁴ Therefore, long-term investment in affordable housing – and approaches where returns are reinvested into housing supply at all tenures and social infrastructure – would likely benefit local residents more, reduce cost pressures on council budgets by lifting the burdens associated to poor-quality housing, ⁵⁵ and contribute to pan-London housing targets.

Fostering collaboration and subregional delivery

Councils express support for collaboration – and in some cases, pooling resources with other councils – but they do not necessarily see the benefits, having different aims and business models. As resources are limited and housing companies are not constrained to operate only within their own borough, there is a strong argument for inter-borough collaboration to optimise capacity and delivery. This might be based on development agreements between boroughs with allocations of affordable housing agreed up front, and any surpluses allocated on the basis of risk sharing. Alternatively, services may simply be delivered for a development management fee.

An example of this is the Pan-London Accommodation Collaborative Enterprise (PLACE), a not-for-profit company and delivery structure set up in May 2018 by London Councils and backed by a GLA allocation grant of £11m. 16 councils are collaborating to build temporary modular housing to tackle homelessness, with an initial target of 200 homes by 2021. Extending this to permanent housing, councils should identify opportunities for collaboration and take the initiative in working together better. In his London Housing Strategy (May 2018), the Mayor has expressed his commitment to explore the long-term potential for a London-wide municipal homebuilding programme.

This does not necessarily imply a pan-London delivery structure, but greater sub-regional collaboration by boroughs could help make the most of scarce resources such as highly skilled project managers; it could also achieve economies of scale, with different boroughs specifying requirements in line with local policies. This might particularly help boroughs that have not yet developed their own in-house capacity. It could be done by using the Mayor’s funding powers to support or encourage the development of sub-regional consortiums or delivery bodies.

Funding

Major changes are needed in two areas:

• HRA borrowing: the government should release the borrowing caps for councils, allowing prudential borrowing against the HRA. In January 2018, the Treasury Select Committee argued that the HRA borrowing cap should be abolished to allow local authorities to increase supply. ⁵⁶ This could contribute towards meeting
  ambitious London Plan targets.
• Right to Buy reform: the government should relax the restrictions on combining receipts with other grant funding and on the time period during which homes must be replaced. In addition, the government should confirm that homes delivered through wholly-owned companies will not be subject to RTB. In the meantime, a new initiative announced by the Mayor of London in May 2018 will allow receipts generated by specific councils to be passed to the GLA and then ring-fenced for investment in affordable housing by the same councils.

Developing capacity and skills for borough building

The Public Practice programme, launched in 2017, is backed by the Mayor and aims to support councils’ capacity to deliver homes and growth by placing skilled planning, design and regeneration practitioners into councils for one-year placements at affordable rates. The GLA should develop the Public Practice scheme to include the development staff that councils and wholly owned companies will need as they start building homes again, perhaps sourcing them from established local authority or private sector development companies.

Sharing data on local housing companies

There is currently no coherent framework for housing statistics in the UK. ⁵⁷ The GLA and the government should gather more data on local housing companies and provide better data on how many housing units – for all tenure types – are delivered by different types of provider, including councils and council owned companies.

Official data on local housing companies is currently almost non-existent, and councils should communicate more clearly about the numbers of new homes that they are delivering (although the same could be said of other housing providers).

Future trajectories for borough building in London

Ultimately, for more affordable housing delivery in London, the government must relax the conditions attached to various funding streams and recognise the key role that councils can play in delivering more housing as part of its upcoming social housing Green Paper. However, in the possible absence of government reform, we need to think practically about what could be done at London level, using London policy levers.

By introducing the first GLA programme to support council housebuilding, providing funding, and helping to build skills and capacity in councils, the Mayor has recognised that local authorities can play an important role in housing delivery in the capital. The next step would be for the Mayor to use his powers to promote a co-ordinated approach to council housebuilding across London, to encourage boroughs to be more involved and to scale up their programmes, and to contribute to knowledge sharing.

Much will come down to the boroughs themselves. Some boroughs are pioneering active approaches to housebuilding in London, but not all are active. However, current examples show that with the right political will and delivery structures, councils can make a much bigger contribution to the housing needs of Londoners. Following the May 2018 local council elections, many newly elected members will want to find ways of delivering more of the housing needed by their communities. As a slowdown in the London housing market threatens to slow delivery by private developers, it is crucial that boroughs become builders again.