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PM: ‘We are scrapping borrowing cap for new council housing’

Alexandra road estate, camden, london in 1979
  • 9 Comments

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. 

Comments

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.

 

  • 9 Comments

Readers' comments (9)

  • chris Dyson

    Fantastic news, really sound policy

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  • if we are to have a new wave of 'council estates' it is critical that they don't replicate failed social/tenure models from the past. A proportion of the homes should be for sale, thereby generating revenue for further development. This policy should also put a stop to demands on volume house-builders to supply so-called affordable home -- in effect a tax on the main suppliers of new housing. Having said that, removing the borrowing cap is as welcome as it was unexpected.

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  • Paul Finch is right, learn from the past - don't make the same mistakes again. Also for Council's to build the maximum number of new social housing from the capital available they must recycle that same capital over and over again not lock it up permanently in bricks and mortar. Owen Luder CBE PPRIBA

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  • Clare Richards

    Excellent first step, but quite apart from funding, design quality and learning from past mistakes, we have to ensure that we are building and supporting proper communities — where people have a say and a sense of control, rents are affordable and social needs are addressed. The status quo isn’t working, at great social and financial cost, so we can’t just create more of the same.

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  • Unexpected and welcome news. It is also key that Council's are provided with some additional funding to enable them to recruit the key people needed within the LA's internal departments (housing, planning, environment etc) to oversee this. Or, should the private sector fulfill this role? My view is it needs balanced resources on both sides (not currently present), sharing a common goal to deliver places, not just homes.

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  • A key plank of neo-liberal Thatcherism appears to have been removed by the Dancing Queen. Let's hope the economy doesn't fall through it. It is however, a long overdue loosening of local authority fiscal corsets. Foolish to have ever imagined you could tax the private developer to build enough social housing. The combination of not allowing councils to reinvest Right to Buy receipts, and S106 affordable housing requirements has been disastrous for 'affordable' housing supply, but brilliant for unaffordable housing supply. A new era dawns. And, if local authorities get it right, they will find their investment 'geared up on' by the private sector. The horse before the cart, finally. Carrots, not sticks.

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  • Well done Captain Slow?! Housing means housing?

    Now think again about the 3rd and therefore 4th runway at Heathrow? The additional runway satisfies anticipated capacity until 2023! And adds to the noise/pollution blight to West London. Heathrow is the place for the new housing. Stansted is the place for additional runways?

    Problems have to be considered in the context of all the other problems, as any good architect or building designer professional will tell you. The lower pollution takes some load off the NHS and more schools and teachers can be provided. Geddit?!

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  • Great Labour policy from 2016. Hopefully the Conservatives will adopt more.

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  • Lifting the borrowing cap from local authorities is definitely a big move in the right direction - but doesn't the history of the post WW2 residential property market in Britain suggest that an entirely new cap needs to be put on the ability of non-residential investors to treat our housing - especially in the London region - as an internationally traded commodity, to take some of the pressure out of the market?

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