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PWLB rates for social housing cut to pre-hike levels
Chancellor Rishi Sunak has cut interest rates by one percentage point for councils seeking to take out public loans for social housing.
The move returns rates for social housing to the level they were at in October before the Treasury announced a surprise one percentage point hike to the cost of borrowing from the Public Works Loan Board (PWLB).
Councils will now be able to borrow from the PWLB at 0.8% over gilts for social housing schemes, with authorities in England, Scotland and Wales eligible for the discount.
Budget documents indicated that the discount will apply to borrowing made through councils’ Housing Revenue Accounts.
Inside Housing previously reported that the Treasury was considering offering councils discounts on loans taken out for housebuilding, after the Local Government Association warned the increase could force projects to be cancelled.
Delivering his Budget speech today, Mr Sunak said the cut was intended to “support local authorities to invest in their communities”.
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Interest rates for non-housing or infrastructure projects will remain at 1.8% over gilts – the cost of government borrowing, which currently sits at around 1%.
Ministers will also make £1.15bn of discounted loans available for infrastructure projects, Mr Sunak said, while a consultation on the future of the PWLB has been launched.
A discounted PWLB interest rate of 0.6% above gilts already applies to certain infrastructure projects.
Town halls in England, Scotland and Wales use the PWLB as their main source of finance for long-term capital projects such as housebuilding schemes, with interest rates historically lower than those offered by private lenders.
Budget documents published today said “a minority of councils have used this cheap finance to buy very significant amounts of commercial property for rental income, which reduces the availability of PWLB finance for core local authority activities”.
“To address this, the government will consult on revising the terms of PWLB lending to ensure [local authorities] continue to invest in housing, infrastructure and front-line services.”
The consultation proposes restricting PWLB requirements to stop lending for councils seeking to purchase supermarkets outside their areas, as well as business campuses and complexes combining homes, shops and offices.
It adds that “access to the PWLB would in principle be allowed for land release, housing delivery, or subsidising affordable housing”.
Council borrowing from the PWLB plummeted from £1.6bn last September to £469m for October when rates were hiked.
Combined, the changes to PWLB interest rates since October are expected to save the government £1.14bn between 2019/20 and 2024/25.
More on the Budget 2020
Inside Housing is bringing you up-to-date news, analysis and comment from the first post-Brexit Budget.
Here are the details of all our coverage so far:
Shared ownership Right to Buy likely to be applied to all rented homes funded under £12bn programme The government is looking at allowing tenants renting homes built through the new Affordable Homes Programme the right to shared ownership of their homes
Fire safety costs ‘could still hit development pipelines’ despite £1bn fund Concerns remain in sector despite cladding removal fund
Budget 2020: an improvement on recent years but questions remain Jules Birch gives his verdict on the first post-Brexit Budget
Housing figures react to ‘positive’ Budget announcements for sector Reaction from key sector figures to the measures unveiled
The housing bits of Sunak’s speech in full Read the key passages from the chancellor’s speech to the House of Commons
PWLB rates for social housing cut to pre-hike levels The cost for councils of borrowing to fund social housing will fall
Budget 2020: the key housing measures at a glance An at-a-glance guide to the key Budget announcements for the sector
Chancellor announces additional £12bn for Affordable Homes Programme Rishi Sunak announces the largest affordable grant programme in years
£650m fund to tackle rough sleeping The chancellor promises to fund 6,000 new places for rough sleepers to live
£1bn Building Safety Fund to remove ‘all forms’ of cladding The government pledges money to make all buildings safer
Housing secretary to announce planning reforms Ministers will set plans to reform the planning system on Thursday
Pre-Budget:
What should the housing sector look out for in today’s Budget? Peter Apps runs through the issues the sector should be looking out for
The housing sector is right to feel anxious about tomorrow’s Budget The government has indicated that its main focus with regard to housing policy is homeownership. The sector should be nervous about what this means for its spending priorities, writes John Perry
What the sector wants from the chancellor James Wilmore sifts through the submissions from the sector’s biggest players to find out what they want from the Budget later today
Conservative MPs urge chancellor to use Budget to build more social housing A group of 27 Conservative MPs and the mayor of the West Midlands have written to chancellor Rishi Sunak ahead of the Budget statement to urge him to allocate more money to building social housing.
How this Budget will signal the government’s direction of travel on housing With the first post-Brexit Budget due, Kate Henderson assesses the issues on which the sector has been lobbying
