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New council house borrowing will be ‘under prudential rules’, says Porter
Ministers will legislate to remove the Housing Revenue Account (HRA) borrowing cap within months with borrowing powers limited only by prudential rules, the chair of the Local Government Association (LGA) expects.
Prime minister Theresa May announced that government will be “scrapping” the HRA borrowing limit in her speech to the Conservative Party conference yesterday.
Lord Gary Porter, chair of the LGA and leader of South Holland District Council, has been heavily involved in negotiating the policy and was in the room to hear Ms May’s address.
He told Inside Housing he believes it will be “weeks running into a couple of months, not months running into a year” before the changes take effect.
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“I don’t think we’ll get anything by the Autumn Budget, that will be too tight, but I don’t think we’ll have to wait until the Spending Review,” Lord Porter added.
He described the announcement as “the single biggest change in social housing since Thatcher”.
The Treasury is thought to be unhappy about the policy – which the government anticipates will add around £1bn to the public balance sheet every year.
It is understood that ministers will seek to pass legislation to lift the cap, with HRA borrowing then coming under the prudential code – the rules which determine other types of council borrowing.
Lord Porter also suggested the new borrowing powers would be focused on “additional units” only, with a focus on mixed-tenure development including homes for social rent, affordable rent and shared equity products.
This could potentially rule out using additional borrowing for refurbishment or repairs.
It is not clear how these restrictions would be enforced, but Mr Porter said he does not believe councils will have to bid to take out new loans within their HRAs.
The government had already offered councils £1bn of additional HRA borrowing, the bidding closed on Sunday and is thought to have been heavily oversubscribed.
Inside Housing has asked the Ministry of Housing, Communities and Local Government whether this programme will now no longer go ahead.
More on the HRA cap announcement
Government now appears to recognise the role of councils - but it needs to scrap Right to Buy Terrie Alafat finds much to like in Theresa May’s council borrowing cap announcement, but wants the government to go much further
New council house borrowing will be under prudential rules, says Porter More details of how new council borrowing rules are likely to work, from the chair of the Local Government Association
More details to come in Budget on borrowing cap The government has been unable to provide any further detail on its plans to scrap the borrowing cap, saying more information will follow in the Budget later this month.
The HRA borrowing cap explained A useful explainer of the context to the council borrowing cap along with a timeline of the story so far
Councils say scrapping debt cap will boost house building More reaction from local authorities
Scrapping HRA cap ‘could see 100,000 homes built’ Details of estimates from Savills on the potential impact of the government’s decision
May’s HRA announcement deserves its warm welcome – but the Budget will be the real test Blogger Jules Birch picks over the announcement
Sector heralds lifting of the borrowing cap as excellent news Reaction to the HRA cap axe from across the social housing sector
Government expects annual £1bn of council borrowing once debt cap is scrapped The first indication of the amount of borrowing ministers are expecting once the cap is no more
Theresa May announces plan to scrap council borrowing cap All the details of Theresa May’s surprise announcement
May's Conservative Party conference speech: the housing bits in full
Below is the text of the housing section of Theresa May's party conference speech:
"Last year I made it my personal mission to fix another broken market: housing.
We cannot make the case for capitalism if ordinary working people have no chance of owning capital.
To put the dream of home ownership back within their reach, we scrapped stamp duty for most first-time buyers – and over 120,000 households have already benefited.
We’ve helped half a million people onto the housing ladder through other schemes like Help to Buy.
And this week we have announced that we will charge a higher rate of stamp duty on those buying homes who do not live and pay taxes in the UK, to help level the playing field for British buyers.
The money raised will go towards tackling the scourge of rough sleeping.
But the truth is that while these measures will help in the short term, we will only fix this broken market by building more homes.
And that is what we are doing.
More new homes were added to our stock last year than in all but one of the last 30 years.
But we need to do better still.
The last time Britain was building enough homes – half a century ago – local councils made a big contribution.
We’ve opened-up the £9 billion Affordable Housing Programme to councils, to get them building again.
And at last year’s conference I announced an additional £2 billion for affordable housing.
But something is still holding many of them back.
There is a government cap on how much they 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."
Speech given to the Conservative Party conference on 3 October, 2018.
