Move to free pounds 5bn from sale of council houses

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Mechanisms to overcome major obstacles to releasing the pounds 5bn local authorities hold from council house sales were proposed yesterday by the Chartered Institute of Housing.

Labour is committed to a phased release of councils' capital receipts, to meet an estimated shortfall of 500,000 homes and counter the decline in the construction of local-authority and housing-association homes for rent.

But while councils hold about pounds 5bn in receipts from sales, according to a new survey conducted for the institute by the accountants KPMG, much of the money is in the wrong place. Councils such as Bromley have receipts running into tens of millions of pounds, but relatively little housing need. Others with high needs, such as Newcastle and Birmingham, have zero receipts.

Under Government rules, local authorities can spend only 25 per cent of their receipts on new housing investment. The remainder has to be held as balances, or used to pay off debt.

Taking away money from capital-rich authorities and re-distributing it is not on, says the report, Boosting Housing Investment Through Capital Receipts. It proposes a formula allowing all authorities to use a minimum of their receipts for housing investment.

Sums held above that would be used to pay off debt by capital-rich authorities, or held as balances, but would then be credited to a notional housing investment pool, which would be allocated to councils on the basis of need.

Boosting Housing Investment through Capital Receipts, CIH, 01203 694433.