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Sector heralds lifting of borrowing cap as ‘excellent news’
The housing sector has welcomed the prime minister’s proposals to scrap the council borrowing cap, saying it will potentially enable them to access funds to build thousands of homes.
While no detail on the exact terms of the policy has been released, Theresa May seemed to suggest that the government will totally remove the limit on the amount local authorities can borrow during her speech to the Conservative Party conference on Wednesday.
Gavin Smart, deputy chief executive at the Chartered Institute of Housing, said the announcement was “excellent news”.
“We have been calling on the government to lift the local authority borrowing cap to help councils build more genuinely affordable homes, so it’s great to see the prime minister listening to the voice of housing professionals,” he said.
He added that councils still needed to be building “the right homes, in the right places, at the right prices”.
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Meanwhile, Lord Gary Porter, chair of the Local Government Association, said: “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.”
He pointed to the 1970s when councils built more than 40% of homes. “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,” he said.
Ruth Davison, executive director of public impact at the National Housing Federation, said: “For years, everyone who builds affordable homes – both councils and housing associations – have argued this cap on council borrowing puts the brakes on building more homes.
“Housing associations are already working hard to build the homes that people need – this announcement will allow them to work more effectively in partnership with councils, pooling their resources and maximising their impact.”
A response from the Royal Institution of Chartered Surveyors (RICS) suggested that the prime minister has recognised that “the housing market is not working for everyone”.
Hew Edgar, interim head of policy at RICS, said: “The government has made tentative steps to tackling the housing crisis since the 2017 Budget but today, in announcing the government’s intention to scrap borrowing caps for councils, the prime minster has taken a large and very positive step.”
He said RICS had long called for councils to be alleviated from the restrictive borrowing cap. “This policy will allow them to re-establish themselves as genuine players in housing again,” he added.
Paul Carter, chair of the County Councils Network and leader of Kent County Council, said county authorities provide “vital infrastructure to support housing” and that lifting the borrowing cap would make this more important.
“If austerity comes to an end, local government must be front of the queue for public spending, particularly county authorities who are under the most severe financial strain,” he said.
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.
