Hounslow Expands Council Home Building Programme

More debt being taken on to fund 1,000 new housing units

9 social rent homes completed recently on Watermeads estate in Feltham
9 social rent homes completed recently on Watermeads estate in Feltham

January 20, 2023

A plan to build an extra 1,000 council homes in the borough has been approved by Hounslow Council’s cabinet.

A report recommending the programme stated that demand for housing support has risen sharply over the last few years due to job losses during the pandemic, rising costs and inflation creating greater strain on household finances.

With house prices 12 times more than the average residents’ earnings, there are currently over 6,000 families on the Council’s housing waiting list, many waiting on average of three years for a permanent home.

A meeting on Tuesday 17 January, approved the Housing Delivery Plan 2022-26. The council managed to exceed the previous plan by building or commencing to build over 1,000 new units, mainly for social rent, by March 2023. 700 of these units are still under construction.

The new plan will be partly funded by grant funding totalling £160m which the Council has secured from the Greater London Authority (GLA) and existing revenues from the Housing Revenue Account (HRA), but an extra £289 million will need to be borrowed bring the borough’s debt relating to housing up to £864 million. This will also provide funding to complete projects from the previous programme which are currently under construction. The report describes the borrowing level as being ‘at the limit of what is sustainable’.

The report recommending the plan says the level of borrowing is sustainable based on the current assumptions including high interest rates and inflation but ultimately the annual cost of servicing debt will rise to £31 million. The projection is that by 2028/29 the cost of servicing debt will totally wipe out the surplus but the situation is expected to improve after that as the completed units will be fully occupied and boosting revenue for the HRA.

The report warns, “Should any projected assumptions such as inflation, interest rates, income or expenditure be less favourable than is currently modelled, savings proposals would need to be urgently sought to ensure the continued viability of the Business Plan. The nature and extent of savings would need to be tailored to meet the specific circumstances of this eventuality, should it arise, but options such as increases in fees and service charges; reductions in planned revenue funded management and maintenance expenditure; and reductions in the scope or rephasing of approved capital programmes would need to be considered.”

A significant proportion of the new units in the new delivery plan will be in three schemes which have already or are about to receive planning permission. The Charlton/Albany Houses - Estate Regeneration received planning permission last September for 209 units, the 124 homes on Commerce Road in Brentford will start construction once the bus garage is finished and the borough planning committee will consider an application for 120 units at Hanworth Park House this spring.

The remainder of the 1,000-unit commitment will be delivered through a mix of smaller development sites, schemes for care leavers and other infill sites.

Each year, subject to inflation, the HRA is projected to receive approximately £89 million in rent and service charge income. Of this, £69 million is spent on housing management, routine repairs and maintenance and other costs. This leaves a surplus before housebuilding programmes and financing of £20 million a year, £14 million of which is used to service current borrowing, leaving an overall surplus of £6 million a year.

The council can use this surplus to build or buy new properties, invest in extra improvements to existing stock or to take on or pay off debt.

The Estate Investment Programmes is investing £210.5 million in council estates over the next 6 years to ensure that statutory standards are adhered to and to increase energy efficiency.

Revenue from the existing council housing stock has been hit by the increased number of voids which developed during the pandemic. There was also increased turnover due to a higher mortality rate in the borough and repairs were delayed and made more complex by the amount of time residents spent in their homes. A plan is in place to refurbish and let the additional voids, and the business plan models voids returning to the usual level of 2% rent loss in the second year of the plan.

Councillor Tom Bruce, Cabinet Member for Regeneration and Development said, “We have a fantastic track record of delivering homes for local people, having exceeded our previous pledge in the last administration. The shortage of quality homes – at genuinely afford rents for local people – has meant demand for Council housing has continued to increase, which is why we have once again committed to building 1,000 new high-quality homes for local people.

“As our local population grows it’s important, we meet the varying needs of our residents, building 1-,2-,3- and 4-bedroom homes are a key part of our delivery plan.

“By building more homes we are also reducing the pressure on our front door services that help to prevent homelessness. We’ll therefore be more equipped to provide early intervention support to help those residents in need before they reach crisis point, while also being able to reduce our reliance on temporary accommodation and private landlords.

“This also provides us with a fantastic wider benefit such as creating a range of jobs and apprenticeship training opportunities for local people in the borough and ensuring we have a housing stock fit for the future to reduce our carbon emissions as a borough.”

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