Re-opening Housing Revenue Accounts: The Way Forward?

With more than 1.2 million households in this country on council housing waiting lists, it is unsurprising that a widespread consensus has emerged in recent years that local government has a critical role in the delivery of social housing.

Yet there have been notable changes in councils’ approach to that role over time, ranging from acting as facilitators, enablers, and partners with the private sector, to the establishment of housing companies.

In recent years Local Partnerships have worked with a growing number of councils who are interested in reopening Housing Revenue Accounts (HRA) and delivering homes directly themselves through that mechanism. For example, we supported Bradford City Council in the reopening of their Housing Revenue Account. More details can be found at Page 41 of our 2022/23 Impact Report.

An opening question that we at Local Partnerships are often asked is ‘how do you go about reopening the HRA?’. On one level – legally and practically – this is an easy question to answer: the council simply needs to make arrangements to open up a separate, ringfenced account for the purposes of developing and managing homes in its ownership.

Reopening Housing Revenue Accounts

While the mechanics of reopening an HRA are simple, councils are likely to face greater challenges in interpreting and applying the rules relating to Housing Revenue Accounts, not least where the corporate memories around HRA ring fences may have been lost many years ago, as councils transferred their housing stock. Councils should not embark on this process lightly, nor without specialised expertise.

Yet the bigger question for councils to ask themselves is surely ‘Should we be reopening an HRA?’. The sector should learn lessons from the recent past, when too many councils embarked on establishing their own housing companies, without really asking that question of themselves. In recent years, we have worked with many councils who are dealing with the consequences of those decisions. (for further details on wider Housing Delivery Vehicle toolkit.

Potential Benefits

There are certainly potential benefits arising from reopening an HRA. Primarily, these benefits are around the opportunity for the council to intervene directly, and at scale, in providing more social housing in its area (remember that councils are only permitted to own up to 199 properties before being compelled to reopen an HRA). In many areas, with the changing shape of the Registered Provider sector meaning that stock transfer RPs have merged into larger, more commercial, but less local, entities, elected members are increasingly of the view that it falls to local government to fill that local gap.

Faced with widespread housing need, it is little wonder that this approach is increasingly appealing to many councils.

As well as the critical objective of meeting local housing need, reopening an HRA may also have other advantages: these include, for example, the benefits of more direct control over developing and delivering business plans for social housing (we have seen too many councils establish housing companies only to encounter difficulties in oversight and scrutiny of their own companies).

Challenges

Councils looking to reopen an HRA will also face challenges familiar to councils who have established housing companies: Is there a pipeline of land that they own or can control which can be used for housing development? Are these sites likely to generate viable schemes? What is the planning position? To what specifications should homes be built? How can a supply chain be procured or developed?  

(For more detailed guidance on pipeline development, please see also our detailed advice on prioritising housing pipelines at Prioritising housing pipelines – Local Partnerships )

Options Appraisals

As with any approach under consideration, councils should conduct a rigorous options appraisal of potential interventions in the local housing market. This involves having a clear understanding of objectives (and their relative importance to the council) and assessing the multitude of options open to the council against them.

Options open to councils do not just include direct delivery (through the HRA or a housing company): they also include levering funds (such as social impact funds or private finance), partnerships (with RPs, or the private or third sector), acquisition and management of existing stock (potentially through the HRA), or site disposals (potentially through a development agreement which includes social housing obligations over and above planning policy).

A fuller description of these options can be found at our housing delivery vehicle toolkit.

There are many levers in front of councils, and understanding which combination of levers that councils should pull, can be complex – yet highly rewarding. In the right local context, reopening an HRA may indeed be part of the solution.

In other words, the answer to the question which councils should be asking themselves – ‘should we be reopening an HRA’ – is highly likely to depend on local context and circumstances, rather than a preconceived policy position. If current trends continue, we expect it to be a question which Local Partnerships will be helping more and more councils answer in the years to come.

• For more information on how Local Partnerships can help councils assess their housing options, including around Housing Revenue Accounts, please contact martin.walker@localpartnerships.gov.uk