Exiting from the Housing Revenue Account Subsidy System

The Welsh Local Government Association, together with local authorities in Wales pressed for many years for the Housing Revenue Account subsidy system to be brought to an end. In June 2013 the Welsh Government and the UK Treasury finally reached agreement on the terms under which the eleven local authorities in Wales with housing stock could exit from the HRA subsidy system and become self-financing.

Some of the key points to note are:

  • Stock Retaining Local Housing Authorities (LHAs) were required to buy themselves out of the Housing Revenue Account Subsidy
  • The £73m of annual negative subsidy payments was replaced by interest payments of approximately £40m. This satisfied HM Treasury’s requirement that the agreement is fiscally neutral over the longer term
  • The £40m annual interest payments was converted to a lump sum settlement value a short period before the agreed implementation date. This enabled LHAs to consider their borrowing requirements in accordance with their local Treasury Management Strategy, to meet current business plan commitments and provide flexibility for LHAs to determine the type and period of loan
  • In order to fund the buy-out, the Treasury required LHAs to borrow from the Public Works Loans Board (PWLB)
  • HM Treasury required a housing related borrowing cap of £1.85 billion to be imposed on each LHA in order to control public sector borrowing

In May 2014 the Welsh Government consulted with the eleven Welsh local authorities with housing stock and the WLGA on the distribution of the settlement figure and the borrowing cap. 

In April 2015 the eleven Welsh local authorities with housing stock became self-financing.

In October 2018, the UK Government announced that the HRA borrowing caps would be lifted for local authorities. Welsh local authorities are currently discussing with Welsh Government the most appropriate method to bring existing voluntary agreements to an end which will remove the HRA borrowing caps in Wales.

For more information contact: Jim McKirdle


The Welsh Local Government Association (WLGA) represents the interests of local government and promotes local democracy in Wales.

Tel : 02920 468680
Mail : enquiries@wlga.gov.uk
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