MPs: scrap Housing Revenue Account cap where housing unaffordable

A report by the Communities and Local Government Committee, Capacity in the Homebuilding Industry, suggests that HRA borrowing caps are limiting local authorities’ ability to build.

The report notes that research by Inside Housing last year found that 57% of 141 councils had not made use of the additional borrowing capacity since the introduction of self-financing in 2012.

However while recognising some local authorities may be wary of increasing borrowing at a time of austerity, the committee recommends that all borrowing caps should be raised and, in areas where housing affordability is at its worst, scrapped completely.

The committee, which wants to see increased building by both local authorities and housing associations, is also calling for the dominance of high-volume house builders to be curbed in order to help fix the housing market. Its report found that the eight largest developers build more than half of all new homes.

In calling for a more competitive market, the committee suggests the government should support small and medium-sized house builders to ensure councils are able to make an effective contribution to solving the housing crisis.

Clive Betts, chair of the Communities and Local Government Committee, said: “The housing market is broken – we are simply not building enough homes. Smaller builders are in decline and the sector is over-reliant on an alarmingly small number of high-volume developers, driven by commercial self-interest and with little incentive to build any quicker.

“If we are to build the homes that the country so desperately needs, for sale and for rent, then this dominance must end.”

The committee recommends improving access to land and finance for smaller builders and says the government should reduce the risk for builders by preparing sites for development by providing infrastructure and planning permissions.

Other issues highlighted in the report include the need for more rental homes, modern methods of construction and improvement in further education to address the growing skills gap in the construction industry.

Mr Betts said: “A successful housing market is a competitive one and government should support smaller developers if it wants to increase the housing stock. This includes earmarking land, improving access to finance and reducing risk by proactively preparing sites for development. Local authorities have a key role to play but have not been given the tools they need to make an effective contribution to solving this crisis.

“Innovation must also be encouraged and we need to finally get to grips with the major challenge of ensuring that the industry has a much-needed supply of skilled workers, without whom this country’s housing crisis cannot be addressed. The government’s promises are encouraging, but their implementation must be closely scrutinised.”