Thousands More Homes Pledged By Councils Under May’s New Rules

Sixty local authority leaders have pledged an immediate drive to build thousands more council homes by exploiting new rules announced by Theresa May. Dozens of councils across the country, led by both Labour and the Tories, have signed an open letter vowing to use new powers to borrow more money to build a new generation of properties. It has led to hopes of the biggest council house-building programme since the 1970s. However, it leaves Philip Hammond with a major headache ahead of his budget later this month. The extra borrowing could add £1bn to the deficit and further constrain his room for manoeuvre, as he already needs to find money to fund the NHS. Read more on the Observer website.

https://www.theguardian.com/society/2018/oct/21/councils-pledge-to-exploit-end-to-borrowing-cap-to-build-homes

Flagship Council House Building Scheme Quietly Axed

A flagship £100m Local Government Association scheme, designed to give smaller local authorities the opportunity to borrow collectively to build housing, has been wound down. LG Develop, which planned to pool local authorities’ borrowing powers and was intended to offer them better rates than borrowing from the Public Works Loan Board, will no longer continue after councils deemed it too risky. The group was set up by the LGA, working with debt advisory firm Centrus, to allow councils to spread costs and risks, and to access finance in larger tranches, lowering borrowing costs. Six councils were signed up to use LG Develop to court institutional debt to build around 2,400 new homes. Read more on Inside Housing.

Housing: Construction – Parliamentary Written Answer

Thangam Debbonaire:  To ask the Secretary of State for Communities and Local Government, with reference to the report of the House of Lords Economic Affairs Committee, Building More Homes, HL 20, published on 15 July 2016, for what reasons there is a limit on the amount local authorities can borrow to invest in building houses.

Gavin Barwell: The borrowing caps were introduced as part of the Housing Revenue Account self financing settlement, which entailed a once and for all rebalancing of housing debt. There are no plans to lift the caps, which are part of the government's strategy to manage the overall level of public debt. Local authorities do have the capacity to borrow to build new homes, there is nearly

£3.4 billion headroom available nationally and £2.9 billion in reserves. 

Councils Hold Back From New HRA Borrowing

Billions of pounds in potential housing investment are being shored up by councils for fear of further changes to rent-setting rules. A survey of 141 councils that run social housing found just 43% have made use of their official permission to borrow more money for housing since 2012. As a result of this widespread reticence, these 141 councils’ collective borrowing power has actually increased from £2.5bn in 2012 to £2.6bn in 2016/17 amid urgent demand for new housing across England. The findings are the most extensive analysis of the multibillion pound borrowing powers awarded to councils as part of the coalition’s historic Housing Revenue Account (HRA) self-financing settlement. Read more on Inside Housing.

Councils 'Should Form House Building Companies'

A government-commissioned report into council house building will recommend councils form companies to build off-balance sheet and increase joint working. Keith House, leader of Eastleigh Borough Council and co-author of the report, told Inside Housing it would recommend ways councils could access further borrowing power without the government lifting caps on the housing revenue account (HRA). He suggested council-owned companies could be one way of achieving this. Setting up a company allows the council to borrow from the public works loan board at low rates without breaching its HRA cap. Read more on Inside Housing.

Councils Can Do Their Bit to Get Britain Building

Housing Minister Brandon Lewis has announced new powers for councils to help them build new affordable homes across the country. The minister confirmed that 22 councils will be able to borrow an additional £122 million over the next 2 years to deliver over 1,700 new affordable homes and support local growth. But with £178 million still up for grabs, Mr Lewis argued that more councils should be putting themselves forward – especially as many have asked for the very borrowing powers that are being offered. Read more on the CLG website.

SHOUT Campaign for Social Housing off To a Great Start

The SHOUT campaign (social housing under threat) got off to a great start with a successful launch event in Parliament. Speakers from the Labour, Conservative, Liberal Democrat and Green parties spoke in support of the importance of social rented housing as a major part of solving the housing crisis. There was considerable cross–Party support for the SHOUT Manifesto. Although not everyone agreed with everything – with political differences most notable around the right to buy – there was a strong consensus in support of building more homes for social rent and in favour of the case for moving back from ‘benefits to bricks’. In an interesting contribution, Gary Porter called for all the political parties to put the removal of council borrowing for housebuilding from the public borrowing requirement in their manifestoes. Read more on the Red Brick blog.

What’s Stopping Councils from Building More Housing?

A report has called for measures – including lifting caps on council borrowing – to allow London councils the opportunity to build housing suitable for low-income families.  Nearly 1 in 8 households in London live in a council home, nearly double the proportion of other parts of England, and demand is growing with over 380,000 households currently on a local authority waiting list. The report warns that despite councils having a good record of sustainable borrowing, the current caps on borrowing imposed by the Treasury – to limit national debt – means London boroughs are torn between their need to invest in improving current housing standards and building housing suitable for low-income households. New research conducted for the report shows most London councils would like to see the caps being lifted.  Read more on the London Gov website.

“Yes To New Homes” – Time To Cure the Housing Deficit Disease

The ugly truth is that we have not been building enough houses to cope with our growing population. We need something like 250,000 new homes a year, yet we are barely building more than 100,000.  It is unrealistic to expect the private sector to boost its production by 150,000 dwellings a year in the short term, and it has never built much more than 200,000 houses a year.  One obvious solution the government currently chooses to ignore is to boost house building by local councils. By allowing councils to borrow to invest, this could increase house building by more than 15,000 dwellings a year. This will be 15,000 households a year that would not otherwise be living in decent housing. They will also be built quickly. Private sector developers are sitting on planning permissions for 400,000 houses, something the public never sector would never do. Read more on the Liberal Democrat Voice website.

Council Borrowing – Parliamentary Oral Answer

Caroline Lucas (Brighton, Pavilion) (Green): If the Government are serious about increasing housing supply, will they look again at lifting the current cap on council borrowing for house building, and at providing direct capital spending to allow councils to build a mass programme of affordable housing?

Mr Foster: We are looking at the point the hon. Lady has raised, and an announcement will be made on 26 June.

Outsourcing Model to Fund New Build

A new repairs outsourcing model has been developed that could increase the borrowing power of councils and finance new house building projects.  If successfully implemented, it could create hundreds of millions of pounds of additional ‘headroom’ underneath councils’ government-imposed borrowing caps following reform of the housing revenue account system. The new model works by delivering a minimum 10 per cent saving on major works by using private sector partners.  The savings would be used to make regular payments to a private sector company, which it could use to borrow against and return the capital funding for investment.  According to proposals from housing consultancy Is4, councils faced with limited borrowing capacity as a result of self-financing rules would be able to fund new house building programmes by outsourcing major repairs work.  Read more on Inside Housing.

MPs Urge Government to Scrap Council Borrowing Caps

MPs have called on the government to rethink the ‘unnecessary’ cap on council borrowing as a way to increase investment in new housing supply. A report from the communities and local government select committee’s inquiry into housing finance recommends a wide range of measures aimed at attracting more funding to allow both housing associations and local authorities to build more homes.  The move to give councils greater borrowing power was backed by the Local Government Association.  The report is also critical of a number of current government policies, including the affordable rent programme run by the Homes and Communities Agency. It recommends that the government bring forward proposals on how to deliver affordable housing after the end of the programme in 2015 so they are in place by the end of 2012. It also calls for the ‘rebalancing of subsidy arrangements’ to take some burden away from housing benefit.  Download a copy of the report from the Parliament website.