The Prime Minister has said he wants to achieve “the biggest council housebuilding programme since the post-war period”. In doing so, he has leant into a safe rhetorical space, while also giving himself a big practical challenge. Councils generally don’t build much anymore, and to achieve his goal, Burnham must find a way to resuscitate them.
Greater devolution to mayors can help him do this. Let me explain.
Aiming for a return to large-scale council housebuilding has a clear rationale: Councils have responsibility for addressing homelessness, they have planning and compulsory purchase powers which should enable their building programmes, and they are more locally and politically accountable than housing associations.
But an immediate return to the era of municipal dreams is not possible.
In the post-war period, local authorities had a level of fiscal and programme-level autonomy that would seem almost unlimited to 21st century local authorities. Firstly, there was no hard limit on capital expenditure. If schemes met basic size and fittings standards and could be funded at the ‘yardstick’ grant rate, councils could draw down funding from central government. Local authorities also had much greater freedom to set their own rents, they could sell (or not sell) property they owned when they wanted to, and they also often bought land and built outside of their own local boundaries.
This period came to an end with the 1976 IMF bailout imposing hard departmental capital spending controls, subsequent limits to local government borrowing, and the imposition of the Right to Buy. But it is important to remember that it was local freedoms and certainty, rather than the policies which ended them, that defined the post-war period.
Today, hard budget constraints from central government continue to define what is possible, and will continue to do so, even if the size of the pot allocated to public housebuilding increases. Councils’ role is residualised, with half not owning any of their own stock and local authorities building only 9 per cent of new social and affordable homes outside London in the last 3 years.
Access to grant funding, administered by Homes England, is set up with the assumption that large housing associations will lead on housebuilding For councils and smaller housing associations, an uncertain system of continuous, competitive bidding makes it difficult to develop consistent development pipelines and grow their operations.
Undoing the difference between these two worlds cannot be done in one go. But the new Government can seek to emulate at least two key features of the post-war regime: firstly, a consistent funding stream councils can draw on, and secondly, local policy autonomy.
Devolution of responsibility for social and affordable housing from MHCLG and Homes England to mayors could help do this.
Firstly, mayors could take on Homes England’s role as distributors of grant funding. Rather than requiring councils to bid for funding scheme by scheme, mayors could agree long-term grant allocations from which councils could draw down. This would give councils the confidence to acquire land, plan development and rebuild the capacity needed to deliver housing consistently, while allowing them to respond to delays and changing costs.
London provides a partial example of how this could work. Five-year funding agreements between the Mayor and boroughs have helped some councils develop the largest housebuilding programmes in the country. But the GLA remains constrained by the amount, timing and conditions of funding it receives from central government.
Devolution therefore needs to be fiscal. Rather than simply asking mayors to distribute centrally determined pots, they should retain set shares of taxes raised locally. Initial funding settlements would need to be set such that funding matched places’ differing levels of need, but these would evolve only periodically and slowly, such is the stickiness of housing problems. This would provide a more stable funding base than grant regimes which can change at any budget or spending review, thus enabling mayors to support councils to plan and develop their housebuilding programmes.
This support from mayors should then come with greater policy autonomy for local authorities, including on the mix of home sizes in developments and the shares of tenures in any given development, so they can respond to local needs and local viability challenges.
Finally, just as local authorities used to respond to land constraints by building beyond their own boundaries (and, in London, rehousing residents in London County Council or Greater London Council-led schemes) mayors in cities today could help manage issues across constituent authorities. Many urban authorities face higher demand than they can build for, and with waiting lists managed council-by-council, many households are left with almost no hope of ever securing a council home.
Mayors could help untangle this by establishing schemes that enable households to move to faster-building authorities, if those households wished to prioritise speed of rehousing over stay in the immediate area.
Now devolution as described couldn’t happen in all places all at once. It could be fast tracked in established mayoralties, such as Greater Manchester and West Yorkshire, while places still waiting for mayors could prepare to take on new responsibilities over time.
Devolution also isn’t a panacea, or the only thing needed to boost council housebuilding. The overall scale of grant funding will continue to set the upper bound for how much gets built. A more permissive planning system, reduced build costs, and clarity on when new compulsory purchase powers can be used to reduce land costs, are all also needed if that maximum is to be reached.
But especially in cities, where multiple councils complicate the management of housing need, mayors can help councils do more. The Prime Minister cannot easily recreate the world in which councils could draw on as much funding as they liked, but using mayors he can establish a system that restores some of that world’s long-term certainty, local autonomy and local responsibility.
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