The Prime Minister
has announced new borrowing powers for councils to build more homes.
In her keynote
address to the Conservative Party annual conference, Theresa May said a cap on
the amount councils can borrow to fund new developments "doesn't make
sense" and would be scrapped.
Currently, town
halls have a housing debt of about £26bn, the value of their existing stock
acting as collateral. Doing away with the cap would conservatively allow an
extra £10-15bn of borrowing. This money could be used to build an extra
15-20,000 new council homes a year over ten years.
Responding to the
announcement, Lord Porter, Chairman of the Local Government Association, said:
“(The) speech by the Prime Minister shows that the Government has heard our
argument that councils must be part of the solution to our chronic housing
shortage.
“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 per cent 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.”
Brian Berry, Chief Executive of the FMB, described the announcement as the "most
exciting, and potentially transformative" 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," he continued.
"Indeed, the only
times the UK has built sufficient numbers of homes overall is when we’ve had a
thriving council house building programme. 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, Mrs May has now signalled that the borrowing cap will be
scrapped to allow councils to build many more new homes.
“We believe this could
also have the added benefit of expanding the capacity of the private sector by
providing more opportunities for SME builders. In this way, a stronger public
sector house building programme can complement and help support a stronger,
more diverse private sector. The private sector will continue to take the lead
in delivering new homes, and to ensure it can do so, we need to continue to lay
the foundations for a diverse private sector in which new firms can more easily
enter the market and small firms can more easily prosper and grow. However, in
order to deliver the number of new homes the Government is targeting it is
going to be necessary for the private and public sectors to both be firing on
all cylinders. That’s why this announcement is so welcome.
“However, as much as
this is a bold and praiseworthy move by the Prime Minister, new homes of any
sort will not get built if we as an industry don’t have the people we need to
build them. 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. 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.”
