Local Housing Companies stall amid public debt fears

A series of joint venture companies between councils and developers have been delayed by poor market conditions and rows over their structure.

The Local Housing Companies (LHCs) were intended to combine council land with investment from private developers, enabling councils to build thousands of homes. The first of the 14 pilot joint venture projects were to have been set up last year; however, none have been formed.

Sources say there has also been a debate between the Treasury and the communities department over whether the financing of the companies should be on or off councils’ balance sheets, and therefore contribute to the level of public sector debt.

A source said: “The communities department needed to refer the question to the Treasury and the Office of National Statistics and that is where the hold-up is because the Treasury does not want it on balance sheet.”

However, Rob Beiley, partner at law firm Trowers & Hamlins, said the delays had been caused by the need to change the balance of homes for sale and rent in the downturn. He said: “My understanding is if the market had been racing ahead, the other issues would have gone away.”

The Homes and Communities Agency (HCA) is now producing a pack of guidance and model legal documents to help other councils set up the companies.

Steve Trueman, head of private finance at the HCA, confirmed talks were continuing about the structure of the LHCs, including the balance sheet debate and whether the companies would be limited liability partnerships.

He said: “Neither issue has delayed progress as both are being resolved concurrently with local authorities developing their own individual projects.”