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Government resists calls to lift council borrowing cap
The government has held firm on its position against raising or removing caps on the amounts local authorities can borrow against their Housing Revenue Account (HRA).
Responding to a wide-ranging report from the Communities and Local Government Select Committee on capacity in the homebuilding industry, the government noted that councils had £3.4bn of borrowing headroom and almost £2.5bn of HRA reserves.
The report recommended that “all HRA borrowing caps should be raised and in some cases removed, where housing affordability is at its worst”. The government, however, said that it has “implemented technical amendments in the treatment of impairments and depreciation of capital assets within the Housing Revenue Account”, neglecting to commit to any raises or removals.
The Labour Party voted at its recent party conference that a future Labour government should lift HRA caps, which Kensington and Chelsea council papers suggest limited the budget for its 2014 refurbishment of Grenfell Tower, which has since been blamed for the swift spread of the fire.
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The report, published in April this year, also recommended that the government give housing associations certainty on rent levels as soon as possible. The government has since done this, announcing a five-year settlement last week.
The committee also called on the government “to take a more active role to improve the wider sustainability of the MMC [Modern Methods of Construction] supply chain and to encourage the market to grow”. As one measure, it suggested that the government produce “a single, recognised, quality assurance mark, sponsored by the government”.
The government said that it would consider this measure with the working group that it is currently setting up with “lenders, valuers and the industry to ensure that mortgages are readily available across a range of tested modern methods of construction”.
