5th October 2018
Insight
Council borrowing cap lifted to boost housebuilding

On Wednesday, Prime minister Theresa May announced that the government will scrap the cap on councils borrowing against their Housing Revenue Account (HRA). May said she was lifting the limit on what local authorities could spend on residential schemes and would allow them to use revenues from existing social housing to invest in new stock.

The prime minister told the Conservative party conference that housing was “the biggest domestic policy challenge of our generation”, but that local authorities were being held back from building by fiscal rules.

Some industry commentators are estimating that local authorities could take on between £10bn and £15bn in extra debt for housebuilding without the HRA cap – building “at least” 15,000 homes a year. A significant increase when you consider that in 2016/17, councils in England built just 3,500 homes.

The announcement has been widely welcomed by the social housing sector and history shows us this move has the potential to transform the sector. It’s quoted that housing associations have collectively raised £80 billion since they were given the ability to borrow back in 1988, with the money used to invest in existing homes and grow their combined stock to over 3 million homes.

With the ability to borrow without the HRA cap, local authorities too can grow their stock and generate surpluses to reinvest back into more affordable homes and local communities. Only time will tell if this change proves to be the moment that transforms modern council housebuilding and returns the scale of delivery to levels not seen since the 1970s.


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