Tuesday, 16 September 2014

Barrier to success

A government that is desperate to boost house building shouldn’t look a gift horse in the mouth. That’s the argument behind the report Let’s get building, published at the end of last year by the National Federation of Arm’s-Length Management Organisations. But after some promising noises from officials in the run-up to the autumn statement, the potential for higher levels of house building by local authorities and ALMOs was disappointingly overlooked.

The obstacle is the caps on council borrowing for housing investment which the government imposed when self-financing began last April. There is a compelling case for removing or reviewing these caps, both because of the urgent need for affordable housing and because it would give a massive boost to the construction industry.

At the moment, councils plan to construct around 3,000 homes per year. But this could increase to 15,000 annually if they were given more freedom to borrow. Even this would require them to use only one third of their borrowing potential and would be well within financially prudent limits.

Even though removing these caps would add to government borrowing, house building is such an effective economic stimulator that much of the additional spending would come back in extra taxes or in benefit savings. Furthermore, councils would make savings on the use of expensive private sector accommodation.

Let’s get building also argues that reform of council housing finance makes the case for a permanent change in borrowing rules even stronger than before. There is no reason why councils shouldn’t simply manage their own prudential borrowing, as the Chartered Institute of Public Finance and Accountancy has argued. Going further, there are now fewer obstacles to the government adopting international borrowing rules which would take council housing investment out of the main measure of government debt. The report shows in detail why and how this could be done.

It’s in the interests of the whole social housing sector to maximise our ability to provide affordable homes, using not only the borrowing capacity of housing associations but of local authorities too. There is tremendous political interest in getting more houses built, yet an obvious channel is being overlooked. Building more homes is an issue that unites local authorities across the political spectrum and this report supplies them with the arguments to put to ministers in 2013.

John Perry is policy advisor at the Chartered Institute of Housing

Readers' comments (2)

  • Peter Fish

    What you are missing in this John is the Government's directive to free up public land for house building. Once this land has been so used, for private development, and the profits gained by the select few, then Councils will be freed to build social homes again - so long as they can afford to pay market rate for the private land that will be the only land remaining.

    Isn't this precisely what happened in 1983, or there about, when the financial restrictions were brought in to encourage a 'sustainable private sector'.

    Unsuitable or offensive? Report this comment

  • Well, John, you and Steve Wilcox have been saying this for 20 years. You are both right yet Governments of both colours ignore you, perhaps when this Government gets desperate it will change its foolish rule on public borrowing, let us hope so !

    Unsuitable or offensive? Report this comment

Have your say

You must sign in to make a comment

sign in register

Newsletter Sign-up

More Newsletters

Related

Articles

  • Free to build

    18/07/2014

    The borrowing caps placed on councils are constraining their efforts to build, argues Grainia Long

  • Councils’ construction quandary

    04/07/2014

    Councils are already building on a scale not seen for decades - but government restrictions are still holding them back. Inside Housing and Higgins Construction ask senior housing professionals what can be done. Corin Williams reports

  • Feast or famine

    27/06/2014

    Local authorities are campaigning for more freedom to borrow and build. But Keith Cooper discovers that some councils still haven’t touched their £2.9 billion first course

  • Breaking free to build homes

    11/04/2014

    Tearing loose from housing revenue accounts, councils are setting up their own companies to provide homes. Pete Apps finds out who is escaping

  • The bigger picture

    15/11/2013

    Don’t use some councils’ questionable practices as an excuse to stop others from building

Resources

  • Fighting back

    01//11/2013

    As the private rented sector continues to grow, so does the number of problematic landlords. Michael Pooler finds out how tenants are taking matters into their own hands to fight for better conditions

  • Freedom to roam

    21/03/2014

    Brighton Housing Trust is no housing giant - but it’s a massive technological help to its clients. Jess McCabe reports

  • Getting connected

    10/01/2014

    Student@Home has discovered the mutual benefits of one-to-one IT training for social tenants. Kate Youde investigates

  • Room for procurement savings

    14/03/2014

    Scotland’s social housing sector is still dogged by the spectre of unnecessary procurement costs but it could save up to £42 million per year

  • A bright idea

    22/11/2013

    Why has a Sunderland-based social landlord set up a charity providing solar powered lamps to communities in Africa? Martin Hilditch finds out

IH Subscription