A short while ago some commentators were tempted to write-off ALMOs, given the numbers of councils who’d taken housing management back in-house or – in a few cases – opted instead for stock transfer.
The key blow looked likely to be the cutting of finance for the decent homes programme, and – even more damaging – the government’s ending of Labour’s requirement that councils getting finance should have an established arms length management company with at least a ‘two-star’ performance.
In fact, announcements of the death of the ALMO proved premature. Many have strong tenant support and indeed several now have tenant chairs. A number of councils have recently extended their contracts with ALMOs, and two have set up new ones even though they no longer provide a route to extra funding. And now a potential new lease of life has been provided – almost certainly by accident – as a consequence of one of the key features of council housing finance reform.
When councils become self-financing next April, they will gain a lot of financial autonomy but will continue to be subject to a cap on their borrowing. As assiduous readers of Red Brick know only too well, this is because their debt is still part of public borrowing.
However, a new report from the National Federation of ALMOs offers three ways in which much-needed investment might be achieved, despite the cap, by authorities who have ALMOs (or decide to create them).
The essence of all three proposals is to reconstitute the ALMO so that is no longer exclusively owned by the council. Indeed, the proposals offer an excellent opportunity for tenants to build on the strong role which they already have in most ALMOs, taking a larger ownership share and a bigger role in the governing board. The ALMO could stay as simply the manager of the housing, as it is now, but as a result of its new constitution be able to borrow privately to supplement the council’s borrowing. It would do so on the strength of its income stream. A second option is the same but with the added assets of
some transfer of land or (perhaps redundant) stock to the ALMO, to give it a partial asset base.
A third, and more radical, option is for the ALMO to take over the stock, but keeping a financial relationship to the council that wouldn’t exist in a conventional stock transfer. The key here is that, instead of paying off the council’s housing debt, the new ALMO (now named a ‘CoCo’ – Community- and Council-Owned Company) covenants to pay the council’s debt charges over the long term. This preserves the advantage of the cheaper debt which councils invariable already have, while creating headroom for new investment that doesn’t count towards the council’s borrowing ‘cap’, and ensuring that the council has a permanent interest in the ALMO’s performance and financial health.
In the next few months councils are going to be so preoccupied with getting ready for self-financing that none of these options are likely to be much explored. However, one of councils’ key tasks will – for the first time – be to produce proper, long-term business
plans. In many cases this will reveal the extent of the investment shortfall facing them if they have to stay within the borrowing ‘cap’.
One of the new ALMO options proposed this week, giving them the potential to invest more in stock improvements, regenerate estates, or even recommence new build, might then start to look very attractive, both to councils and to tenants.