Manifesto measures can unleash council borrowing capacity

The recognition of the importance of the role of councils in solving our housing crisis is one of the biggest positives to come from the manifesto launches this week.

The last time we built anywhere near the amount of homes we needed, councils played a major part – and supporting councils to become major house builders would see them able to play the same critical role again.

When the general election was called we asked for pragmatic proposals to solve the housing crisis. Revisiting the restrictions which prevent councils from building, something all parties have committed to in their manifestos in some form, is an excellent example of that.

“The recognition of the importance of councils is one of the biggest positives from the manifesto launches.”

Councils have been unable to contribute to housebuilding in a significant way for many years now.

The introduction of self-financing in 2012 was meant to resolve a decline in council housebuilding, and offered potential building capacity of 550,000 over 30 years – more than 18,000 homes a year. 

But maximising the potential of this historic change required councils to be able to maintain their income from the homes they own. Unfortunately subsequent policy decisions have eroded that potential capacity to the point of it being virtually non-existent.

Our research suggests that the rent reduction alone reduces the capacity of council building to just 45,000 homes over the next 30 years. Last year just 2,090 new homes were built by councils.

At the same time the number of social rented homes is plummeting at an alarming rate – primarily as a result of Right to Buy and the conversion of social rents to higher affordable rents.

“The next government must follow up on the promises which have been made.”

Our projections show that between 2012 and 2020 we will have 250,000 fewer such homes at a time we desperately need more of these homes, not less.

Last year we called on the government to work with individual local authorities on bespoke deals to build new homes giving them greater flexibilities in return for commitments on housebuilding.

We were delighted that they listened and we held talks with local authorities, other housing bodies and officials from the Department for Communities and Local Government to move this forward earlier this year.

The Conservatives have pledged to turn this into a wider plan to strike deals with councils, while Labour and the Liberal Democrats have also pledged to lift borrowing restrictions for council housing.

The next government must follow up on the promises which have been made and work closely with councils to unleash the significant extra capacity they can bring to the table.

Only with councils playing a major part can we solve our housing crisis.

Terrie Alafat, chief executive, Chartered Institute of Housing