This was a supporting detail page of the main policy document.
We have reformed council housing finance. In April 2012 we ended the Housing Revenue Account subsidy system. This means councils can now keep their rental income and use it to fund their housing stock (called ‘self-financing’). The powers to introduce self-financing were in the Localism Act 2011. On 1 February 2012 we published the final details of self-financing. This included the one-off payments to or from each council, which we used to adjust their housing debt to reflect the value of their stock. Councils whose existing housing debt was higher than the value of their stock had some debt paid off by the government. Councils whose debt was lower than the value of their stock borrowed to pay the difference to the government. These payments were based on a valuation of each council’s stock, using a 30-year discounted cash flow model of income and expenditure. The costs in the model assumed that councils will need to spend on average 15% more on managing and maintaining their stock than was assumed under the subsidy system. The objectives of this reform are:
to give councils the resources, incentives and flexibility they need to manage their own housing stock for the long term and to improve quality and efficiency
to give tenants the information they need to hold their landlord to account, by creating a clear relationship between the rent a landlord collects and the services they provide
As part of the self-financing settlement the government has imposed a cap on the overall levels of borrowing councils can undertake against their Housing Revenue Account. This is necessary to ensure we manage overall levels of public sector spending to help reduce the national deficit. The government recognises that some councils may need additional borrowing to help them to achieve their housing ambitions, so has made available an extra £300 million Housing Revenue Account borrowing over 2015 to 2016 and 2016 to 2017. This borrowing will support up to 10,000 new affordable homes. See further details about the Housing Revenue Account borrowing programme.