Reform of the Housing Revenue Account

Reform of the Housing Revenue Account Subsidy System

From April 2012, the system of local authority housing finance (known as the housing revenue account, or HRA) will undergo the most significant and far reaching change since the war, and will be devolved to local authorities to manage themselves. Authorities which own housing stock will gain full control of their housing income and expenditure and be able to make their own decisions on how and in what way they invest in tenants' homes. If they wish, they will even be able to build new homes using surplus rental income.

The reform of the HRA has been a long process. The previous Labour Government consulted on HRA devolution and moved towards it, but did not implement it. The Coalition Government confirmed in February 2011 that it was going ahead with HRA devolution from April 2012, a move for which there was broad cross-party and sector support.

In return for being able to manage their own HRAs, the 171 stock-owning local authorities have been allocated a share of the national housing debt, totalling some £28bn.  London's boroughs have fared relatively well in this settlement, being allocated £5.5bn of debt, some 25% less than estimated was originally owed.

In addition, local authorities have had a ceiling placed on their ability to borrow against the rental income that they will now receive in full. This is because local authority borrowing counts as part of the Public Sector Borrowing Requirement (PSBR) and thus counts as part of the national debt, which the Government is keen to reduce. 

'From Self-Financing to Self-Determination' - London Councils research into post-April 2012 HRA options

Opens in a new windowLondon Councils commissioned Navigant Consulting to work with us to see what the options are for London's boroughs to use the new freedoms post-April 2012 to invest in stock.

In November 2011 London Councils published the result of this work, and both the full report and the Executive Summary can be accessed below.

The report sets out a range of options that boroughs can do, either on their own or by cooperating with other boroughs.  These range from developing robust active asset management strategies to different models enabling the trading of headroom capacity and joint HRA-funded development. 

The options set out in the report are just that - options that individual boroughs may or may not wish to take forward. However, we hope that the report acts as a useful framework to help boroughs develop their thinking in this area.