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Councils still face a number of obstacles to building more homes despite hopes that lifting the borrowing cap would result in a development spree, new research has found.
When the cap on borrowing against councils’ Housing Revenue Accounts (HRA) was scrapped in autumn 2018, the government promised it would herald “a new generation of council homes”, but a new report by the Chartered Institute of Housing (CIH), the National Federation of ALMOs and the Association of Retained Council Housing has shown that councils are still facing barriers to building.
Although all 22 councils and ALMOs surveyed had plans to build in the coming year, many said they would like to build more if there were fewer restrictions.
While the government’s planned rents policy from 2020 onwards was generally welcomed, councils and ALMOs said they needed more long-term income stability and would prefer a 10-year policy, as opposed to the five years the government is proposing, as well as more local flexibility to allow for regional differences.
They also said the Right to Buy continues to present a problem, and in some cases it was cited as a disincentive to building, as new homes might have to be sold after only three years and possibly at less than what it cost to build them.
The respondents to the research also said that restrictions on how they can use the money they raise from selling these homes also limited building.
The recent increase to the cost of borrowing from the Public Works Loan Board (PWLB) also “tightens the finances for new build” within local authorities’ HRAs, the research found. In many cases, where councils depend on local housing companies to mount their new build programmes, it will increase their costs as loan charges are linked to PWLB rates.
Many respondents highlighted the need for more grant funding, as well as land shortages and planning constraints, even when the council is the planning authority for its own development.
Meanwhile, the industry is being held back by a shortage of skilled staff and competing priorities for finite resources, it said, such as investment in existing stock to meet new safety standards or improve energy efficiency.
John Perry, author of the report and policy advisor at the CIH, said: “Councils and ALMOs are ready and willing to take on long-term investment programmes, but stability is vital. There needs to be a consistent approach to rents policy and no wider policy changes that would compromise the major commitments which councils are now taking on.”
He also said that given the “very diverse approaches” taken by councils when building new homes, local authorities need more local powers and flexibility to decide on issues, such as the Right to Buy, grant access and local rent levels.
Chloe Fletcher, policy director at the National Federation of ALMOs said: “The lifting of the HRA debt cap was fantastic news to the sector and a very necessary reform of the system but it is not enough on its own. Finding land on which councils can afford to build is a huge concern, as is the current Right to Buy regime which both depletes housing stock and siphons public money out of the system.”
She added: “[The] government needs local authorities – the national housing crisis is a problem that the private sector simply can’t solve on its own.”
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