Removal of cap on borrowing to allow councils to build more homes widely praised

The announcement by the Prime Minister Theresa May that the Government will lift the borrowing cap on councils to allow them to build many more homes has been widely welcomed by the industry.

May told the Conservative Party conference in Birmingham that housing is ‘the biggest domestic policy challenge of our generation’ and admitted that local authorities were being held back from building by fiscal rules.

She said that the Government would scrap the current cap on how much councils could borrow against the value of their housing stock, which was implemented in 2012.

Brian Berry, chief executive of the Federation of Master Builders (FMB), called it ‘the most exciting, and potentially transformative, announcement on council housing for many years’.

It is a move that the house building sector and local authorities have been calling out for since the last economic downturn as a means by which to increase house building. Indeed, the only times the UK has built sufficient numbers of homes overall is when we’ve had a thriving council house building programme.

‘Local authorities have a strong interest in delivering new affordable homes and many would have the appetite to directly fund this, but have been frustrated from doing so by an artificial cap on their ability to borrow against their assets to build homes. In a victory for common sense,’ said Berry.

‘We believe this could also have the added benefit of expanding the capacity of the private sector by providing more opportunities for SME builders. In this way, a stronger public sector house building programme can complement and help support a stronger, more diverse private sector,’ he pointed out.

‘The private sector will continue to take the lead in delivering new homes, and to ensure it can do so, we need to continue to lay the foundations for a diverse private sector in which new firms can more easily enter the market and small firms can more easily prosper and grow,’ he added.

But, he also pointed out that in order to deliver the number of new homes the Government is targeting it is going to be necessary for the private and public sectors to both be working together.

‘However, as much as this is a bold and praiseworthy move by the Prime Minister, new homes of any sort will not get built if we as an industry don’t have the people we need to build them,’ said Berry.

‘Recent announcements on post-Brexit immigration rules, if implemented as currently understood, will be a serious threat to our ability to deliver on the promise of this policy. The failure of the Government so far to listen to the construction industry could unfortunately threaten the delivery of the Government’s increasingly bold moves to solve the housing crisis,’ he concluded.