Local authorities may become housebuilders again after borrowing cap relaxed, but they say Osborne must go further
Some councils may become housebuilders once again after George Osborne announced a limited relaxation of the caps on local authority borrowing to finance the construction of 10,000 new affordable social homes over the next four years.
Local authorities, who have been lobbying for more housebuilding freedoms, welcomed the move in principle but said it did not go far enough. Removing the borrowing cap completely would have allowed them to build 60,000 new homes.
The announcement was one of several policies unveiled in the autumn statement aimed at increasing housing supply, including measures aimed at speeding up the planning process, and making it easier for developers to push ahead with new schemes.
A separate measure aimed at supporting home ownership among low- to middle-income households will see the provision of £100m of mortgage finance support to allow more social tenants to buy their house or flat under the right-to-buy scheme.
The chancellor also revealed that ministers will consult on a “right-to-move” scheme to help social housing tenants who need to relocate to another authority area to take up a job or training opportunity.
Relaxing council borrowing powers will not return English councils to their 1950s and 60s housebuilding heyday, when they oversaw the construction of millions of homes, nor will it make much of a dent in the 1.8m-strong national social housing waiting list.
But it will potentially see council housebuilding levels rise substantially from the 1,900 homes they built in 2011-12.
Councils will have to bid through a competitive process for the proposed £300m housing finance borrowing facility. Successful councils will be expected to partner with housing associations, contribute public sector land to any proposed developments and cross-subsidise any bid through the sale of vacant high-value social homes.
The communities and local government secretary, Eric Pickles, said: “Housebuilding remains critical to our economic recovery and we are providing the funding, the reforms and encouraging the innovation that will get homes built, give councils more ability to provide housing, and create local jobs.”
Mike Jones, chairman of the Local Government Association’s environment and housing board, said: “Government has today acknowledged councils’ argument that the current restrictions on our ability to invest in new housing are not fit for purpose. This is an important first step towards untying the hands of local authorities to build the new social housing which millions on housing waiting lists desperately need.”
The Chartered Institute of Housing (CIH) warned that the requirement to sell off high-value social housing and the fresh support for right-to-buy raised the prospect there will be no net increase in the volume of social housing stock, despite the councils’ new building powers.
The CIH said a more ambitious scheme would raise local authority borrowing caps by £7bn, rather than £300m. This would allow councils to build 75,000 new homes over five years, and create 23,500 jobs and £5.6bn of economic activity.
The housing charity Shelter warned that the requirement to sell off high-value social homes in order to finance the building of developments risked stripping affordable housing away from the places where it was most needed.
Campbell Robb, its chief executive, said: “It could mean essential workers finding themselves priced miles out of our cities, as finding a place to live on a cleaner’s, nurse’s or teacher’s wage becomes more difficult than ever. If we want to safeguard the recovery, we need to make sure that the people who keep our economy going will be able to find an affordable place to live.
“We need to see bolder ideas to get affordable homes built, not more piecemeal policies.”
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