Prime minister Theresa May’s unexpected announcement that the government is scrapping the cap on how much councils can borrow to build new homes has been widely welcomed
Speaking at the Conservative Party conference in Birmingham today (3 October), May said she was lifting the limit on what local authorities could spend on residential schemes and would allow them to use revenues from existing social housing to invest in new stock.
It is a move that has long been called for by councils and could, many hope, kickstart a new wave of social housing projects.
She told the conference: ‘There’s a government cap on how much [local authorities] can borrow against their Housing Revenue Account assets to fund new developments.
‘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.
‘So today I can announce that we are scrapping that cap. We will help you get on the housing ladder and we will build the homes this country needs.’
A ‘delighted’ RIBA president Ben Derbyshire said: ‘The prime minister quite rightly says that the housing shortage is the biggest domestic policy crisis the country faces. But it is not enough to simply build more, the houses of today need to be designed and built to last.
‘We will continue to work with the government to put the policies in place needed to secure high-quality homes now and for the future.’
Royal Institution of Chartered Surveyors head of policy Hew Edgar added: ‘Housing is one of the most complicated market situations that we have seen for some time, and too many are locked out from accessing decent, affordable homes.
‘The government has made tentative steps to tackling the housing crisis since the 2017 Budget; but today, in announcing the government’s intention to scrap borrowing caps for councils, the prime minister has taken a large, and very positive, step.
‘Forty years ago, local councils built 40 per cent of all new homes; but for too long, councils have been limited in their capacity to make this significant contribution.
‘The next stop is the UK Budget on 29 October, and we would urge the chancellor to build on this policy and support a wider range of house building participants; thereby diversifying housing delivery vehicles and tenures.’
Trevor Goode, head of planning and public sector at law firm Ashurst said: ‘The government has at last listened to the plea from local authorities to remove the constraints around funding and allow them to use their land and powers to deliver much-needed housing.
‘Some local authorities have been innovative and created separate companies focused on using council land to build housing. The changes announced today will enable local authorities to have direct control over the delivery of additional social housing.’
There is still no known timescale for when the cap will be removed. However, a recent £2 billion pledge to help social housing providers build thousands more homes will only be effective from 2022.
Brian Berry, chief executive, Federation of Master Builders
This is the most exciting, and potentially transformative, announcement on council housing for many years. It is something the house-building sector and local authorities have been crying out for since the last economic downturn as a means by which to increase house building. Indeed, the only times the UK has built sufficient numbers of homes overall is when we’ve had a thriving council house building programme.
This is the most exciting, and potentially transformative, announcement on council housing for many years
Local authorities have a strong interest in delivering new affordable homes and many would have the appetite to directly fund this, but have been frustrated from doing so by an artificial cap on their ability to borrow against their assets to build homes. In a victory for common sense, May has now signalled that the borrowing cap will be scrapped to allow councils to build many more new homes.
John Dickie, director of policy and strategy, London First
Taking the fiscal handcuffs off local authorities could lead to a new era of council-led housing development and is long overdue.
But it’s just a first step. We have a £20 billion funding gap to overcome to build the 300,000 new homes each year already promised by the chancellor - and in London, it’s £8.6 billion.
While the PM’s move is welcome, we still need more money, more land made available to develop, and better, smarter ways of building if we’re going to deliver the number of homes we need.
Melanie Leech, chief executive, British Property Federation
Lifting the council borrowing cap is something our industry has called for over many years and should enable local authorities to invest in their communities’ economic and social wellbeing.
We urge local authorities to take advantage of this, to support new housing delivery and provide a significant boost to the social housing sector.
Sanity in an insane world. Great news. Bravo! https://t.co/G9EhbGPofE— Luke Tozer (@LukeJETozer) October 3, 2018