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No borrowing cap flexibility before 2019 for councils discussing bespoke deals
Councils that have been discussing potential bespoke housing deals with the government will not be granted any extra borrowing capacity until at least 2019.
Sheffield City Council, Stoke-on-Trent City Council, and Newark and Sherwood Homes – Newark and Sherwood District Council’s ALMO – have been in talks with the Department for Communities and Local Government (DCLG) since March about additional borrowing headroom.
Several other councils have also approached the government to discuss their own debt caps, after the Housing White Paper expressed interest in striking “bespoke housing deals” with local authorities.
However, the government has now confirmed that these councils will have to wait until 2019/20 before they are given extra Housing Revenue Account flexibility.
They will need to bid against other authorities in areas of “high affordability pressure” for £1bn of extra borrowing capacity, in line with a policy announced by chancellor Philip Hammond in last week’s Autumn Budget.
A spokesperson for the DCLG said: “We expect that all stock-owning local authorities, regardless of any prior discussions with the government, will be able to bid for extra HRA borrowing from 2019/20.”
He added that the government does not have a target for the number of homes it hopes to see delivered through the policy.
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Inside Housing understands that at least one of the three councils involved in the original talks has asked the government to be given access to additional headroom sooner than 2019.
Jayne Dunn, cabinet member for neighbourhoods and community safety at Labour-run Sheffield City Council, called the announcement “deeply disappointing” and accused the government of “kicking the issue of building social housing into the long grass”.
Stoke-on-Trent City Council and Newark and Sherwood Homes both welcomed the policy.
Eamon McGoldrick, managing director of the National Federation of ALMOs – which has been supporting the Sheffield, Stoke, and Newark and Sherwood discussions – said: “It’s great to have the £1bn and it’s good that it will be restricted just to councils.
“But we are disappointed around the bespoke deals. It’s almost as if the two councils and the ALMO are just going to have to join the queue and then they could miss out – although in fairness we haven’t yet seen the bidding criteria.
“We would have hoped there’d be some reward for these authorities having done all the legwork. They are ready to go and this £1bn isn’t around the corner – it’s not opening up until 2019/20.”
The main table in the Autumn Budget document shows £355m earmarked for “Local Authority housebuilding” in 2019/20, with another £265m and £260m in the two subsequent years – meaning councils could wait four years before being allowed to borrow more.
That amounts to a total of £880m, suggesting the Treasury does not expect full take-up of the policy.
A similar initiative introduced by former chancellor George Osborne in 2014 offering councils £300m of extra headroom was wound down after £220m was allocated to build just 3,000 homes – well below the government’s 10,000 target.
According to the Autumn Budget document, the government will monitor how councils respond to the £1bn offer and “consider whether any further action is needed”.
Appearing before the Treasury select committee yesterday, Nick Forbes, leader of Newcastle City Council and senior vice-chair of the Local Government Association, said: “Rather than having a competitive process, it’s better to just lift the borrowing cap for all local authorities, so that we can all get on and take the decisions that are in the interests of our respective communities.”
KEY BUDGET MEASURES AT-A-GLANCE
- Investment of £44bn in housebuilding in capital funding, loans and guarantees over the next five years to boost supply of skills, resources and land
- Commitment to be building 300,000 homes a year by mid-2020s
- £1.5bn package of changes to Universal Credit announced. This includes the scrapping of the seven-day waiting period at the beginning of a claim, making a full month’s advance available within five days of a claim for those that need it and allowing claimants on housing benefit to continue claiming for two weeks
- Lift council borrowing caps in "high-demand areas"
- A £125m increase over two years in Targeted Affordability Funding for Local Housing Allowance claimants in the private sector struggling to pay their rent
- New money into Home Builders Fund
- Extra £2.7bn for Housing Infrastructure Fund
- Invest £400m in estate regeneration
- £1.1bn on unlocking strategic sites
- Stamp duty for first time buyers on properties worth up to £300k will be axed, while the first £300k on properties worth up to £500k will also be scrapped
- Three new Housing First pilots announced for West Midlands, Manchester and Liverpool
- Councils to be given the power to charge 100% council tax premium on empty properties
- Government will launch a consultation to barriers to longer tenancies in the private rented sector
- £38m for Kensington & Chelsea Council for mental health and counselling services, regeneration projects in areas surrounding Grenfell Tower and a new community space
- Invest in five new garden towns
- £125m increase in Targeted Affordability Funding for Local Housing Allowance claimants in the private sector struggling to pay rent
