Setting Up a Local Housing Company: A Strategic Tool for Local Government Transformation
- truthaboutlocalgov
- Jul 8
- 5 min read
As the UK continues to grapple with a persistent housing crisis, local authorities are increasingly seeking innovative, flexible, and locally controlled mechanisms to deliver new homes and regenerate communities. One of the most significant developments in this space has been the rise of the Local Housing Company (LHC), a council-owned or council-sponsored vehicle that enables local authorities to directly intervene in housing markets, shape development outcomes, and retain long-term value for their communities.
Mark Baigent’s How To Set Up A Local Housing Company (2nd Edition) is a timely and comprehensive guide that distils over a decade of experience into a practical roadmap for councils. It offers detailed insights into the legal, financial, and governance frameworks required to establish and operate an LHC, while also reflecting on the broader strategic purpose these companies can serve in a rapidly changing policy and economic environment.
What Is a Local Housing Company?
A Local Housing Company is typically a wholly owned subsidiary of a local authority, established to acquire, develop, or manage housing outside the constraints of the Housing Revenue Account (HRA). This structure allows councils to operate with greater commercial flexibility, enabling them to deliver mixed-tenure housing, respond to local market conditions, and reinvest surpluses into public benefit.
LHCs are not a one-size-fits-all solution. They can be tailored to meet a wide range of local objectives, from increasing the supply of affordable homes and supporting estate regeneration, to generating income, intervening in failing markets, or delivering specialist housing for older people or those with complex needs. Baigent’s guide makes clear that the decision to establish an LHC should be rooted in a clear understanding of local housing need, market dynamics, and political ambition. It is not simply a technical exercise, but a strategic intervention with long-term implications.
Why Set One Up?
The motivations for setting up an LHC are as diverse as the councils pursuing them. Common drivers include:
Overcoming HRA constraints: While the 2018 removal of the HRA borrowing cap expanded councils’ options, many still face restrictions on rent-setting, tenure mix, and development scope within the HRA.
Retaining control over development: LHCs allow councils to act as master developers, shaping the design, tenure, and pace of development in line with local priorities.
Delivering mixed-tenure schemes: By combining market sale, shared ownership, and affordable rent, LHCs can create financially viable schemes that cross-subsidise social outcomes.
Reinvesting locally: Unlike private developers, LHCs reinvest profits into local services, infrastructure, or further housing delivery.
Responding to local need: Councils can use LHCs to deliver housing types that the market often neglects, such as larger family homes, accessible units, or supported housing.
The guide also highlights the importance of timing and context. In areas with overheated housing markets, LHCs can help moderate prices and increase supply. In areas of low demand, they can act as market stabilisers, acquiring and improving existing stock.
Key Considerations in Setting Up an LHC
Clarity of Purpose
A successful LHC begins with a clear and shared understanding of its purpose. Is the company primarily a delivery vehicle, a long-term asset holder, or a regeneration partner? Baigent stresses that this clarity is essential for shaping the company’s legal structure, governance model, and business plan.
Legal and Financial Structure
Setting up an LHC involves navigating a complex legal and financial landscape. Councils must determine the most appropriate legal form (e.g. company limited by shares or guarantee), establish shareholder agreements, and ensure compliance with procurement, subsidy control, and tax regulations. Funding models, whether through equity, loans, or land transfers, must be carefully designed to balance risk and return.
Governance and Risk Management
Effective governance is critical to the success of an LHC. The guide explores different board structures, the role of councillors and officers, and how to manage potential conflicts of interest. Risk management is a recurring theme, particularly around financial exposure, delivery performance, and reputational risk. Councils must ensure that oversight mechanisms are robust, transparent, and proportionate.
Delivery Models and Partnerships
LHCs can operate in a variety of ways: as direct developers, joint venture partners, or asset managers. The guide includes case studies of councils that have used LHCs to unlock stalled sites, deliver modular housing, or acquire homes from the open market. Flexibility is key, but so is realism about capacity, market conditions, and the council’s appetite for risk.
Long-Term SustainabilityBaigent emphasises that LHCs must be built for the long term. This means developing a viable business plan, setting clear performance metrics, and ensuring that the company can adapt to changing political, economic, and regulatory conditions. Councils must also consider exit strategies and the potential for future restructuring or reintegration.
Why This Matters to Elected Members
For councillors, the establishment of a Local Housing Company is a powerful expression of local leadership. It signals a commitment to proactive, place-based solutions in the face of national policy constraints and market failure. LHCs offer members a way to deliver on political priorities, whether that’s tackling homelessness, supporting key workers, or regenerating neglected neighbourhoods.
Importantly, LHCs allow councils to retain control over land, design, and tenure mix, ensuring that development reflects community needs rather than developer profit margins. This is particularly valuable in areas where private developers have failed to deliver on affordable housing commitments or where viability arguments have undermined planning policy.
LHCs also offer a platform for councillors to demonstrate innovation, ambition, and accountability. They provide visible, tangible outcomes, new homes, improved estates, thriving communities, that resonate with residents and voters. For members, this is not just about housing, it’s about shaping the future of their places.
Why This Matters to Housing Officers
For officers, LHCs represent a strategic opportunity to deliver housing in new and more effective ways. They offer a platform for innovation, whether through modern methods of construction, new funding models, or resident-led design. Officers can use LHCs to unlock difficult sites, accelerate delivery, and respond to complex housing needs with greater agility.
LHCs also create opportunities for cross-departmental collaboration, bringing together housing, finance, legal, planning, and regeneration teams around a shared agenda. This can help break down silos, build organisational capacity, and foster a more strategic approach to housing delivery. However, the guide is clear that LHCs are not a silver bullet. Officers must be prepared to invest time and resource in business planning, stakeholder engagement, and performance management. Success depends on clear objectives, realistic assumptions, and strong governance. But for those willing to engage with the complexity, LHCs offer a powerful tool for delivering lasting impact.
Why This Matters for Local Government
The housing crisis is one of the most pressing challenges facing local government today. Councils are under pressure to deliver more homes, more quickly, and with fewer resources. In this context, Local Housing Companies offer a compelling alternative to traditional delivery models.
They enable councils to:
Build homes that meet local needs, not just market demand
Retain control over land, design, and tenure mix
Generate income to support wider services
Act as market stabilisers, especially in areas of low or overheated demand
Demonstrate leadership and innovation in the face of national policy uncertainty
Create long-term value through asset retention and reinvestment
Baigent’s guide makes clear that setting up an LHC is not without risk, but with the right planning, partnerships, and political will, it is both achievable and increasingly necessary. Councils that embrace this model are not just building homes, they are building capacity, confidence, and resilience.
Final Thoughts
How To Set Up A Local Housing Company (2nd Edition) is more than a technical manual, it is a strategic toolkit for local authorities seeking to take control of their housing futures. It combines practical advice with deep insight, offering a clear-eyed view of both the opportunities and the challenges. For councillors, it provides a compelling case for bold, locally-led action. For officers, it offers a detailed roadmap for turning ambition into delivery. And for local government as a whole, it reinforces the message that councils can, and should, be at the forefront of solving the housing crisis.
