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False and dangerous myth

Housing lobbyists have pushed a dangerous myth for too long: that the best way to boost council house building is to abolish the ‘borrowing cap’

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Housing lobbyists have pushed a false and dangerous myth for far too long: that the best way to boost council house building is to abolish the so-called ‘borrowing cap’.

Set authorities free by removing this ‘arbitrary’ ceiling and councils will raise 15,000 homes a year, they say. Such a claim is undermined by new research to be published by Inside Housing this week.

This points towards far more pressing constraints on council house building than the borrowing cap. Laid low by central government cuts, many authorities are simply nxot in the mood to invest in new build. Most of the £2.9 billion of investment already available is untapped.

Some councils are refusing to borrow to build until the effects of the welfare reforms become clear; others lack the experience or confidence to develop. Decades bereft of the ability to develop has withered their experience, skills and ambition.

Such findings should force the housing world to face an uncomfortable truth: it is not the borrowing cap holding councils back. And demands for its abolition build only a straw man- a dangerous distraction from the real and practical problems that must be urgently fixed.

The crisis in confidence identified by this research is understandable during these days of austerity. But it will in no way be eased by lavishing authorities with unbridled borrowing powers when they are not employing the investment potential they already possess.

A better and more sophisticated medicine will be needed if councils are to become an important part of the solution to the chronic housing problems their residents face.

Some of this treatment is already being formulated by the Treasury review into council house building, led by the lawyer Natalie Elphicke. Expect it to recommend ‘buddying’  arrangements which hook up inexperienced councils  with seasoned developers, such as private builders, housing associations or experienced authorities.

As the largest developer of homes in England’s second city, Birmingham could do wonders by helping smaller authorities that possess borrowing power but have no idea how to use it. Southwark can teach how to fund development in housing hot spots using high land values. And northern authorities like Wakefield can demonstrate how to build in areas of ‘market failure’, where private firms find no profit in boosting housing supply.

To be effective, the Elphicke review must, however, join all the dots of the house building industry. It must find ways of mixing the skills and experience of private developers and housing associations with the untapped borrowing power and land holdings of local authorities.

Extra borrowing capacity will make little difference until town halls employ what they already possess. What’s needed now is a practical cure for councils’ house building malaise not a pointless campaign to lift the cap.


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