May announces end to council borrowing cap

During her party conference address, PM clears the way for councils to build thousands of new homes.

Building Site 08

Theresa May has announced an end to the council borrowing cap in its entirety to boost housebuilding.

Confirmation came unexpectedly during the PM’s party conference address.

Councils have long called for an end to the cap to extend their homebuilding ambitions.

Briefing against the announcement was quick in coming from some quarters.

Critics claimed the measure would have had to be imposed on a resistant Treasury, given its potential impact on the deficit – with the debt going on the national balance sheet.

Concerns have also been aired over the quality of homebuilding.

But LGA chairman Lord Porter said the scrapping of the cap showed government has heard the case for councils to be part of the solution to the housing crisis.

He said: “It is fantastic that the government has accepted our long-standing call to scrap the housing borrowing cap.

“We look forward to working with councils and the government to build those good quality affordable new homes and infrastructure that everyone in our communities need.

“Our national housing shortage is one of the most pressing issues we face, and it is clear that only an increase of all types of housing – including those for affordable or social rent – will solve the housing crisis.

“The last time this country built homes at the scale that we need now was in the 1970s when councils built more than 40% of them.

“Councils were trusted to get on and build homes that their communities needed, and they delivered, and it is great that they are being given the chance to do so again.”

Ruth Davison, Executive Director of Public Impact at the NHF, said scrapping the cap opened up opportunities for housing associations and councils to work more effectively in partnership with pooled resources.

“For years, everyone who builds affordable homes – both councils and housing associations – have argued this cap on council borrowing puts the brakes on building more homes,” said Davison.

“We know that we need to build 340,000 homes in England alone every year. Last year, only around 160,000 were built.

“We are so far off building the number of homes we need that councils, and housing associations must be able to do more if we are going to solve the housing crisis,” she said.

Acknowledging a “welcome shift”, shadow housing secretary John Healey said: “Tories capped council borrowing for housing when finances were localised – it’s taken them six years to promise to undo their mistake, as Labour has been arguing.

“(The) devil will be in the detail – we need action now.”

Sarah Jones, shadow housing minister, said the PM had “picked up another Labour housing policy”.

London Assembly Housing Spokesperson, Tom Copley AM, called on the PM to go further and scrap “disastrous” Right to Buy as a key driver of the housing crisis.

“We have long called on the government to lift the cap on council borrowing to build new homes as part of a series of measures to trigger the return of mass council housing building – at long last they are beginning to listen,” said Copley.

“Over the last few years, councils across London have been building high quality new council homes for social rent for the first time in a generation. Yet their capacity to deliver could not match their ambitions because of central government borrowing restrictions.

“If only the Government had acted sooner, we could have made even more progress in tackling London’s housing crisis,” said Copley.

Earlier this year, the LGA said new council ‘development corporations’ wouldn’t lend themselves to house building unless government lifted the cap.

The LGA wants oversight of local development corporations delegated to councils so that local communities can have as much say as possible about developments in their areas.

New Local Government Network (NLGN) director Adam Lent said that, with the welcome end to the cap, government must now “move fast” to tackle the crises in both housing and council finances.

“There is only so much uncertainty that both service users and those needing decent accommodation should be expected to endure, so clarity over the detail of these announcements is crucial,” Lent said.

Chartered Institute of Housing director of policy and external affairs Gavin Smart said the “excellent news” was tempered by a need to see detail.

“If we are to have any hope of tackling our national housing crisis, councils must play a critical role, and this move will help them reach their potential.

“But of course it’s not just a numbers game – we need to make sure we are building the right homes, in the right places, at the right prices.

“That’s why it is so important to give councils the tools they need to build more truly affordable homes for social rent,” Smart said.

Citing the PM as saying austerity would end, Cllr Paul Carter, chairman of the County Councils Network, said councils now needed to be at the front of the queue for public spending – having contributed more than any other part of the public sector to reducing the deficit.

“The County Councils Network’s unitary members will welcome the lifting of the housing borrowing cap to build more homes,” said Carter.

“For those district local authorities who may now seek to use these extra borrowing capabilities, the role of county councils in providing vital infrastructure to support housing is now even more important.

“As the housing minister suggested yesterday (Oct 2), this must come alongside greater strategic planning across larger, county-wide geographies, and we will work with government and district partners to deliver this.

“County local authorities face a funding black hole of £1.4bn next year. To fill this funding gap they are likely to earmark some £1bn worth of further cuts and savings.

“To avoid this, and to allow our councils to invest to improve public services, government should provide significant funding to councils after eight years of austerity,” he said.

Adding their voice to the responses, Lois Lane, Research and Policy Adviser at the Campaign to Protect Rural England, said: “This announcement is welcome news for rural communities in particular, who have long required a step change in the delivery of social housing.

“There are currently more than 191,000 households on rural local authority waiting lists, but last year only 990 new homes for social rent were built in those areas. At that rate it would take 190 years just to meet the backlog.

“Rural councils should take advantage of the change and start building more of the truly affordable homes the countryside needs to thrive.”

FMB chief executive Brian Berry warned new homes of any sort will not get built if the construction industry didn’t have skills on the ground.

“Recent announcements on post-Brexit immigration rules, if implemented as currently understood, will be a serious threat to our ability to deliver on the promise of this policy,” he said.

“The failure of the government so far to listen to the construction industry could unfortunately threaten the delivery of the government’s increasingly bold moves to solve the housing crisis.”

Campbell Robb, Chief Executive of Joseph Rowntree Foundation, said: “It’s right to make it easier for councils to build new homes but we should be clear how many households are on a housing treadmill in this country, their housing costs keeping them shackled in poverty.

“More than 30,000 new additional low cost rented homes are needed each year in England – this gap must be fully filled if the broken housing market is to be fixed.”

Bjorn Howard, group CEO at Aster Group, said  freeing up council-owned land for housing is vital to meeting the UK’s development targets, as is empowering those councils to build more.

“Enabling them to borrow more against their housing revenues to fund development is a step in the right direction that will help boost delivery,” said Howard.

But he warned that with councils not as active in housebuilding as they used to be, ramping up development will require expertise that “perhaps, isn’t as prominent” in local government as it once was.

“Collaboration with the housing sector will be crucial to making the most of the cap removal.

“We’re looking forward to working with councils to help them boost build rates and ensure a healthy provision of affordable housing as part of our own commitment to building 11,800 homes between now and 2025,” said Howard.


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