Government underfunding of affordable housing in London and the limits it imposes on councils’ freedom to borrow to build have produced a flourishing of what are called local housing companies among the capital’s boroughs.
These are commercial enterprises formed by councils with a view to increasing the supply of housing locally and producing a profit for the borough in the process. This can be invested in more home-building, used to support hard-pressed council services or both.
More than half of London’s 32 boroughs have now formed housing companies of one kind or another. Some are in their early stages, but a recent report by the Smith Institute described those of Croydon (Brick by Brick) and Barking and Dagenham (Reside and its broader regeneration vehicle Be First) as “running at a fast pace”.
Newham’s Red Door Ventures is one of the largest, focusing on homes for private rent, one third of them at sub-market levels. The Smith Institute says Newham hopes Red Door will bring in an extra £18m in Council Tax by 2028, £17.5m in community Infrastructure Levy and a dividend in a few years’ time.
Other boroughs who’ve set up companies include Ealing (Broadway Living), Waltham Forest (Waltham Forest Developments Limited), Hounslow (an aspect of Lampton 360), Havering (Mercury Land Holdings), Southwark (Southwark Housing Company) and Sutton (Sutton Living Limited).
The emerging Haringey Development Vehicle, which has produced such a backlash from the Jeremy Corbyn Left in that borough, is just a joint venture variation of the model, which Transport for London also uses. The housing companies of some other boroughs also allow for joining forces with private investors and developers with a view to spreading risk and drawing on their financial strength and expertise.
What are the advantages of these Council-owned, or partly-owned, entities? They are an increasingly attractive alternative to straight sell-offs of public land combined with negotiating sometimes paltry commitments to providing “affordable” housing and other community benefits as part of the deal. They instead enable councils to retain direct control over their own land and how it is developed.
Also, they enable wider access to finance and have certain advantages over other sorts of housing companies, speeding delivery, helping to address unmet local needs and providing some protection against the incursions of Right To Buy. They can produce a variety of “affordable” housing types as well as good quality new homes for private rent, and they can generate revenue for the council over the long term.
The limitations, though, are the familiar ones. In an excellent summary of the Smith Institute report and issues arising from it, Red Brick Blog underlines that the amount of affordable housing produced by Council-owned companies and its degree of affordability is dependent on the sale of market-priced homes or income from market-level rents. These expensive dwellings produce the profit needed to subsidise “affordable” provision. “In this sense, local housing companies operate exactly like housing associations,” Red Brick says.
The outcome seems much the same too. An array of homes from across the “affordable” spectrum can be produced, and that is good – high housing costs in London now adversely affect a wide range of people including many on London middle-incomes, and they too are in need of help.
However, the amount of homes delivered by council-owned companies for what these days we need to describe as traditional social rent – generally 40%-60% of local market levels – is put at around only 10% nationally. London needs a much higher strike rate at or near that end of the scale.
There are also implications for the availability of council-owned land in the future should it ever become easier for boroughs to deliver more conventional council housing. Once it has had other sorts of homes built on it, probably at pretty high densities, there won’t be room for anything else there.
All told, local housing companies in their various incarnations in London are ingenious, pragmatic and enterprising ways for boroughs to get around some of the worst aspects of low housing supply and unhelpful national government policies, but they have limitations and drawbacks too. With all their pros and cons, they are a growing feature of the London housing landscape and likely to remain so.