Are councils using ‘Independent Housing Companies’ to dodge Right to Buy?

Last week saw Homes for Reading, a new ‘socially responsible housing company’ welcome its first tenants. The company is the latest in a line of wholly owned council businesses.

The intention behind Homes for Reading is to establish a commercially successful, socially responsible landlord in Reading in a bid to ease the city’s housing crisis. However, what it doesn’t do, at this stage, is build any new homes.

The first property was purchased by Homes for Reading in September 2017 and was let within a matter of days at a full market rate. As the business grows, profits from market rate properties could cross subsidise properties for the registered homeless. Deals have been completed on a further four properties and there are reportedly several more flats and houses coming on the market over the next few months.

The model is not just being adopted in Reading and not just by Labour councils. The London Borough of Newham has also explored using an independent company to address its housing shortage. 211 new homes will be built by developer Barratt London at Boleyn Ground for rent at 40%, 60% and 80% of market rates to address the problem of spiralling rents and plummeting levels of home ownership, which is particularly acute in the borough.

The as yet un-named company is a separate entity from existing company Red Door Ventures, set up in 2014 to deliver 3,000 homes in Newham. The council is understood to have borrowed £162million at a cheap rate through the Public Works Loan Board which is then loaned to Red Door Ventures at a commercial rate to circumvent restrictions on borrowing to build new council housing.

In Guildford, a £22million business plan was approved in July 2017 for North Downs Housing Ltd – a similar venture which will let properties to tenants with incomes between £30,000 and £65,000. The decision proved controversial as it emerged a majority of those employed by Guildford Borough Council itself don’t earn enough to be eligible to rent one of the properties on offer.

Guildford is exploring a number of alternative initiatives including opportunities for promoting Homes in Multiple Occupation (HMO) which are already common in cities and large towns. The council has also written to Communities and Local Government Secretary Sajid Javid asking for a change in legislation that would allow it to use the proceeds from the Right to Buy policy to purchase homes for shared ownership.

Yet another joint-venture scheme in Watford has seen the creation of Hart Homes, an independent company which Watford Borough Council has a 50% stake in. Hart Homes will hold properties for both market and affordable rent and is designed to reduce the number of households in the borough living in temporary accommodation.

Whilst these initiatives are certainly interesting, it is unlikely they will have a significant impact in addressing the housing crisis in London and the South East. Only Newham’s independent companies are actually delivering any new housing and these are currently on a very small scale. With questions beginning to be asked about how these schemes are being financed, and whether they are being used as legal loopholes to save local authorities money, these new ‘independent housing companies’ are certainly worth keeping an eye on.