Borrowing cap to be removed at end of the month

Mr Brokenshire’s letter states: “We intend to remove the borrowing cap by issuing a determination revoking previous determinations that specified a local authority’s limits on indebtedness.”

A consultation on the plans will run for just six days, until 24 October.

After that, the government’s aim “is to remove the borrowing cap as soon as possible, with further details confirmed in the Budget”, according to the letter.

Lord Gary Porter, chair of the Local Government Association, told Inside Housing: “There’s been no interference at all from Treasury, they’ve been very supportive. The sense of doing it seems to have settled into people.

“Big up to Mrs May for pulling it off, big up [chancellor] Mr Hammond and big up James Brokenshire for making sure it gets delivered.

“They have really hit the ground running. It should be really good, we should see a renaissance in social housing.

“We don’t need a new housing bill – it should be a relatively simple administrative process. It has gone much better than anybody would have anticipated last week.”

Treasury were understood to be unconvinced by removing the cap, and some had feared that strict rules might have been tied to removing the cap in order to limit the policy’s impact on public spending.

The HRA cap was introduced in April 2012 as part of local government self-financing reforms.

It sets each council a limit on how much they are allowed to borrow to invest in housing.

Many local authorities have already borrowed their full HRA debt allowance – and campaigners have long complained that the cap significantly restricts town halls’ ability to deliver new homes.

Mrs May’s announcement that the cap would be scrapped was widely welcomed by the social housing sector.

Ministers expect the move to see councils build another 10,000 homes a year, borrowing around £1bn between them.

In 2016/17, local authorities in England developed only around 3,500 new homes.

Councils in areas of “high affordability pressure” were offered £1bn of extra HRA borrowing headroom over three years at last year’s Autumn Budget.

Bidding for that programme, which closed just three days before the prime minister’s announcement, is understood to have been heavily oversubscribed.

Mr Brokenshire’s letter today said: “I am pleased that so many councils took the opportunity to bid for a share of the available additional borrowing.

“This was very helpful in demonstrating the scale of local authority ambitions ahead of the prime minister’s announcement.”