Councils overspend by £51m as right to buy costs bite …

Soaring right to buy sales and staff costs forced councils to overspend on housing management by £51m in 2002/3.

The cost of running each council home rose by three times the rate of inflation.

The figures were revealed in the Housing Quality Network's annual review of local authority housing performance. It also showed that the time taken to re-let voids has fallen in the North, adding weight to recent evidence that housing demand is growing in the region (HT 20 February, page 9).

HQN's survey of England's 240 council housing departments found the cost of managing homes had risen 6.3% across England, three times the rate of inflation (see "The rising cost …", left).

The rise over the past four years totalled 26% while inflation was 9%. The survey also found that:

• rent collection improved from 96.9% to 97.2%
  
• by April 2002, 48% of council stock did not meet the decent homes standard while the figure for housing association homes was 22%
  
• the average time for council tax and housing benefit administration was 44 days, way outside the government target of 14 days.

Hal Pawson, senior research fellow at Heriot-Watt University and author of the report, said: "Much of this rise is down to right to buy sales and demolitions. When you dispose of stock, unless you delete posts and reduce overheads, then the underlying trend is for management cost for each unit to rise." Rising salaries and pressure from inspectors to improve performance also contributed, he said.

The situation was particularly bad in London, where management costs rose 9% to 2002/3 – double the budgeted rise in costs. The average price of managing a house in the capital rose from £22.86 to £24.96 a week.

The councils' planned rise was to just £23.92 a week for each property, equating to a £26.7m overspend across London. In the South, this figure was £8m; in the Midlands £7m and in the North £13m, making a total of £51m.

Pawson said this trend had been exacerbated by the fact that the homes lost in right to buy sales are generally the better properties, leaving the properties with higher management costs in local authority control.

Richard Kemp, vice-chair of the housing executive at the Local Government Association, said the increasing costs left councils in a difficult position: "As we can't increase rents, in most cases it means councils will have to make cuts in repairs or other services."

Last week Copeland council's stock transfer was almost derailed when the investment required for each house rose after greater than expected right to buy disposals (HT 27 February, page 10).

HQN's figures also revealed a fall in the time taken by Northern councils to re-let vacant houses from an average of 54.5 days in 2001/2 to an average of 49.4 days in 2002/3. Ross Fraser, chief executive of benchmarking consultant HouseMark, said: "Low demand, in some areas, is disappearing."