How can registered providers partner with local authorities to deliver genuinely affordable housing?

Policy levers 

A number of policy levers have the potential to reverse these direct and indirect costs to local communities and radically improve housing.

Firstly, ‘presumption in favour of social housing’ could allow local authorities to prioritise an agreed percentage of their developable land for permanent social housing. These houses would never be available for Right to Buy.

Local authorities would bring sites forward, without capital receipt, but with a long-term ground rent – this takes out the land cost and immediately creates a ‘genuinely affordable’ proposition.

Registered providers would then ‘bid’ for the site based on fixed maximum modelled costs per unit against a pre-determined and agreed local need of unit type and size – and preferably delivered from a national pattern book of replicable offsite templates to optimise cost and performance.

The homes are therefore immediately affordable as there is no land cost or developer profit and the rents could be flexed to reflect the household income to ensure they are genuinely affordable to key workers and lower-income households.

The rent would allow the social landlord a reasonable surplus to manage and maintain the properties and a ground rent for the local authority.

The local authority could designate a proportion for young people (who are not low earners) with a mechanism for ringfencing the difference between market rent (which they would be charged) and the affordable rent.

After a fixed period of three to five years, they would have to vacate the property but would be given a rebate of £x plus interest as their deposit for a house purchase/shared ownership. This would free up the property and support ownership aspirations without losing social housing stock.

So, how does this look in terms of legal guidance and precedent?

Section 123 is the basic rule that, without the consent of the secretary of state, a local authority shall not dispose of land for a consideration less than the best that can reasonably be obtained.

Where there is an element of discount or grant in a transaction, the authority must obtain the consent of the secretary of state.

That is not to say that ‘consideration’ must be money. Consideration can be money’s worth and a council can account for the consideration arising provided it is all part of the disposal terms.

This sometimes happens where there is a public-private partnership to redevelop a local authority site. But the legal documents (eg parallel contracts) have to make it very clear that there is sufficient interconnection between the various transactions and there is a robust business case to demonstrate that the best consideration has been obtained.

If a local authority concludes, having taken appropriate steps, that it wants or needs to make a disposal at an undervaluation, then it can go ahead with the secretary of state’s consent. And it would need to consider whether it can proceed under the terms of the general consent that is available or whether it must apply for a specific consent.

The general consent contains several categories, and rather than amend primary legislation it might be more appropriate to see if there is a procedure that could be used to vary the general consent to expand the categories used.

Section 25 of the Local Government Act 1988 is an example of legislation that allows local authorities to dispose of land in a certain way that is held for a particular function.

Here the legislation allows a local authority to dispose of social services land that is classified as housing.

Section 24 of the same act allows a local housing authority to have the power to give financial assistance to any person for the purpose of or in connection with the acquisition and construction of any property which is intended to be let as private housing.

This section is used by councils disposing of social services land to housing associations for no money, but under Section 25 the local authority cannot dispose of the land in this way to give financial assistance without the consent of the secretary of state.

As for Section 123 there is a general consent under which local authorities can proceed. If the transaction envisaged does not fall within the specified categories of the general consent, they would need to apply to the secretary of state for consent.

Sections 24 and 25 have been used by local authorities to dispose of land to be developed for residential accommodation providing some form of supported housing or housing with care.

In conclusion, the cost to UK plc and local authorities of the lack of long-term homes is significant and should be balanced against the perceived benefit of the capital receipt in asset sale.

Savings to the government and local authority should be significant over time by reducing homelessness costs, eliminating housing benefit dependence, and in time losing the economic drag caused by insufficient and poor housing. This is whilst supporting people to transition into homeownership without depleting social housing stock.

Sarah Daly, sustainability strategist