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Is Theresa May’s pledge on council borrowing a housing crisis game-changer?

Image janet hall riba library photographs collection crop2
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The surprise move to lift the cap on local authority borrowing to fund housebuilding has been universally welcomed, but are councils in the position to deliver it?  Richard Waite reports

The government’s pledge to lift the cap on council borrowing was hailed by the Federation of Master Builders as the ‘most exciting, and potentially transformative, announcement on council housing for many years’.

Unexpectedly revealed by prime minister Theresa May at last week’s Conservative Party conference, the move was widely praised by figures from across the industry – though exact details and timings remain limited.

May said she wanted to lift the limit on what local authorities could spend on residential schemes by allowing them to use revenues from, and borrow against, existing social housing to invest in new stock.

‘There’s a government cap on how much [local authorities] can borrow against their Housing Revenue Account assets to fund new developments,’ she told the conference. ‘Solving the housing crisis is the biggest domestic policy challenge of our generation. It doesn’t make sense to stop councils from playing their part in solving it.’

The last time councils delivered half of all new homes, half of all architects worked for the public sector. Today, it is less than 1 per cent

May even acknowledged that the last time the nation managed to build the hundreds of thousands of new homes needed each year was in the 1960s and 1970s, when local authorities were instrumental in delivering many of them. Calls to scrap this fiscal ceiling have been made for many years and were even a 2016 Labour party pledge.

But whether councils are actually in a position to build thousands of extra homes was one of the questions raised by Finn Williams, co-founder and chief executive of Public Practice – the not-for-profit organisation which seeks to embed architects from private firms in local authority planning teams.

He told the AJ: ‘Councils understand the urgency of the housing crisis and have the political will to take direct action. They now, finally, have the borrowing powers to deliver housing at scale. The challenge councils now face is how to rebuild their capacity to build. 

‘The last time councils delivered half of all new homes in the country in the mid-70s, half of all architects worked for the public sector. Today, it is less than 1 per cent. Public Practice is starting to reverse that trend.’

While admitting the government’s lifting of the borrowing cap ‘opened up exciting opportunities for architects to work in the public interest’, Williams issued a further warning: ‘We must do this in a way that learns from past generations of council housing without losing any of their vision or ambition.’

To deliver enough genuinely affordable homes, however, there will need to be investment from central government

Bob Kerslake, former head of the civil service and chairman of housing association Peabody, said the removal of the cap was something he had ‘long argued for and was most welcome’.

‘Working together, councils and housing associations can make a significant contribution to tackling London’s acute housing shortage,’ he said. ‘To deliver enough genuinely affordable homes, however, there will need to be investment from central government. We still don’t know the detail on the timing of when the cap will be removed and there are currently counter-productive housing policies in place which need reform. I’m thinking of Help to Buy, Right to Buy and the ongoing problems with welfare reform and Universal Credit.

‘And of course the elephant in the room is the threat of a no-deal Brexit. This would be catastrophic for the housebuilding industry, given the likely effects on the labour market, materials and the value of the pound. Notwithstanding these concerns, the government has shown a commitment to councils and housing associations and their capacity to deliver new social housing. This is a welcome step forward.’

Alexandra road estate, camden, london

Alexandra road estate, camden, london

Source: Martin Charles/RIBA Library Photographs Collection

Alexandra Road estate, Camden, London

Colm Lacey, managing director and chief executive of Brick by Brick – Croydon’s arm’s length housing delivery vehicle – said: ‘This is obviously very welcome news, and in combination with the potential for a similar deregulation of how Right to Buy receipts may be used, could significantly increase the number of new homes entering the affordable sector. The key challenge will be in protecting the new affordable homes for ongoing use by those in genuine housing need.’ Whatever the true significance of May’s announcement, we will have to wait for key details, including the launch date.

A schedule for when the cap will be removed may emerge in the budget on 29 October. But it should be noted that a recent £2 billion pledge to help social housing providers build thousands more homes will be a long time coming – it will only be effective from 2022.

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Readers' comments (1)

  • John Kellett

    I wonder what brought that on? Will Councils be obliged to use qualified building designers or will they be expected to obtain the cheapest services as usual?

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