COMMENT: With officials advising that there would be no major policy announcements on housing in the hours leading up to Theresa May’s party conference speech – and no detail emerging in the hours that followed – there was every indication that the lifting of council borrowing caps was a policy hastily conceived.
Perhaps not conceived, but conceded. After all, there has been a consensus that the cap on local authorities borrowing against their housing revenue should be lifted. MPs, housing associations, councils – even the Commission for the Protection of Rural England – have argued that it would substantially increase supply.
There is a political imperative, of course. This government has pledged to fix the broken housing market. It has vowed to build one million new homes by 2020 and another half million by 2022. And the impact of the policy could be transformational. In January, demanding the cap be removed, the Commons Treasury committee said: “The potential of local authorities to build should be unleashed.”
More homes built?
Forty years ago councils built 40% of new homes. Last year it was less than 2%. These new rules could see up to 27,500 new homes built, according to Shelter. In the London borough of Lewisham alone, based on 2012 data, the lifting of the HRA cap would create an additional £220m, which could fund 1,460 new homes.
Officials are expected to push the policy through quickly, so expect further detail in the Budget on 29 October. Hopefully there will be greater clarity before then, but it gives chancellor Philip Hammond a few shorts weeks to frame an explanation that this is long-term investment, not short-term borrowing, however it gets treated in the government accounts.
And while the implication from May’s speech is that this is a meaningful granting of freedom, it’s inconceivable that it will be completely without constraint. Of course, prudential borrowing rules exist to prevent unconstrained borrowing, but Westminster and Whitehall are nothing if not instinctively distrusting of ceding power. It would be surprising if further rules were not put in place.
Now to the how. Local authorities will need to build up the capability to deliver and that won’t happen overnight, especially with a skills crisis embedded and post-Brexit visa policy uncertain.
Public-private partnerships
Can councils deliver in partnership with the private sector? On the face it that seems to contradict the spirit of the policy. Yet it would speed up delivery. Clever, pragmatic councils might find a way to do so in a way that satisfies these febrile political times. Working with housing associations might be the quicker fix.
And once the detail emerges, might the government be tempted to go further? Could ministers seek to redefine the relationship between the public and private sectors? Government has successfully – and wrongly – helped convince the public that it is greedy developers who bear responsibility for the lack of social housing. The funding regime doesn’t help.
Large parts of the wider public don’t understand how developer contributions to local authorities via s106 and CIL fund social housing and public infrastructure. All they see is what looks like a negotiable tax.
London School of Economics professor Tony Travers says developers are “parastatal” organisations when it comes to housing delivery. That can’t be right. The welcome lifting of the borrowing cap will deliver more social housing. It could also be the beginning of a more fundamental re-examination of how housing gets delivered. I won’t hold my breath.
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