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Government scraps cap on local authority borrowing to help boost housebuilding

Words: Martin Read

The prime minister has announced that the government is scrapping the cap on local authority borrowing to fund new housing development.

Speaking in her keynote speech on the final day of the Conservative Party Conference, Theresa May reiterated her message that stimulating housebuilding was “the biggest domestic policy challenge of our generation”.

Speaking of the government’s existing initiatives to help local authorities do their bit to increase housing supply, she admitted that “something is still holding many of them back”, and that “it doesn’t make sense to stop councils from playing their part.”

The move to scrap the housing revenue account borrowing cap was quickly endorsed by many.

Lord Porter, chairman of the Local Government Association (LGA), said: “It is fantastic that the government has accepted our long-standing call to scrap the housing borrowing cap. We look forward to working with councils and the government to build those good-quality affordable new homes and infrastructure that everyone in our communities needs.

“The last time this country built homes at the scale that we need now was in the 1970s, when councils built more than 40 per cent of them. Councils were trusted to get on and build homes that their communities needed, and they delivered, and it is great that they are being given the chance to do so again.”

Lois Lane, research and policy adviser at the Campaign to Protect Rural England (CPRE), said: “This announcement is welcome news for rural communities in particular, who have long required a step change in the delivery of social housing. There are currently more than 191,000 households on rural local authority waiting lists, but last year only 990 new homes for social rent were built in those areas. At that rate it would take 190 years just to meet the backlog. Rural councils should take advantage of the change and start building more of the truly affordable homes the countryside needs to thrive.”

Polly Neate, CEO at Shelter, said that the change could see up to 27,500 new social homes built each year. 

"For comparison, only just over 5,000 social homes were built last year in total. Scrapping the borrowing cap lays down the gauntlet to local authorities to bring forward homebuilding plans – no more excuses.“

In April, the Labour Party committed to scrapping the cap as one of the measures in its plan to tackle rising rental costs and the decline in home ownership. 

Further reaction can be found here on The Planner.

Image credit | Getty