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Theresa May announces plan to scrap council borrowing cap
The government will scrap the cap on councils borrowing against their Housing Revenue Account (HRA), Theresa May announced today.
Speaking at the Conservative Party conference, the prime minister revealed that the government will totally remove the limit on the amount councils can borrow.
Currently, local authorities can only borrow a certain amount against their HRA, a policy many councils – Labour and Conservative – have long complained about.
In last year’s Autumn Budget, Philip Hammond announced an extra £1bn of extra headroom that councils in high-demand areas could bid for.
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The housing minister should understand it is not prudent for all councils to max out their borrowingCouncils had been preparing bids for this fund, but London authorities had complained that they were only able to access £500m.
Inside Housing reported in July that this fund in the capital was set to be overwhelmed with demand, and so the outright scrapping of the cap would provide relief to London councils at least.
Ms May said: “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 £9bn Affordable Housing Programme to councils, to get them building again. And at last year’s conference I announced an additional £2bn 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.”
Last month, Ms May announced £2bn of funding for affordable housing at the National Housing Summit in London.
The funds are set to be part of the government’s next affordable housing programme, starting in 2022.
This year’s Conservative Party conference saw some other announcements on housing, most notably the confirmation from housing secretary James Brokenshire that the government will ban combustible materials on high-rise buildings.
Mr Brokenshire also announced funding for an athletes’ village in Birmingham, a confirmation of planning proposals to allow building upwards without planning permission and the creation of a New Homes Ombudsman.
The ombudsman, he said, will be a legal route of redress for buyers of new homes against poor quality development.
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.
