Magazine article Public Finance

LGA Explores Solution to HRA Debt Dilemma

Magazine article Public Finance

LGA Explores Solution to HRA Debt Dilemma

Article excerpt

Local authority leaders are considering a way of reforming the housing finance system that would avoid councils taking on the debts of others.

The move follows the government's statement last week that councils would need to agree a one-off reallocation of debt for a speedy dismantling of the housing revenue account.

Otherwise, said ministers, local authorities should expect to wait until 2012/13 before legislation was passed. Even then they might end up with a system that involved the government controlling some of the money raised in rents.

But the Local Government Association, which doubts it would be possible to reach agreement over debt reallocation, said there might be a third way.

Instead of high-debt councils passing some of their burden on to others, all authorities could become self-financing. They could then use their rent income to pay off debt they are deemed to have accrued for homes built in the past 80 years.

Ruth Lucas, an LGA consultant, said the association wanted to test the feasibility of councils carrying individual debt with them as they leave the HRA. We need to see how it will stack up for different authorities and whether it gives them enough headroom to borrow and fund their stock,' she said. …

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