May offers surprise vow to scrap limits on council borrowing to build more homes

THERESA May gave town hall chiefs reason to join her in a jig today when she announced she was scrapping a cap on borrowing that has hamstrung councils’ ability to build more homes.

The borrowing cap has long been a bug-bear of councils; limiting how much they can borrow against their Housing Revenue Account (HRA) assets to fund new developments. Local authorities, and bodies within the wider housing sector, have long lobbied for the cap to be lifted.

Now, in her closing speech at the Conservative Party conference in Birmingham today, the Prime Minister has granted councils the carrot they’ve long been wanting.

“Solving the housing crisis is the biggest domestic policy challenge of our generation. It doesn’t make sense to stop councils from playing their part in solving it,” May said. “So today I can announce that we are scrapping that cap. We will help you get on the housing ladder. And we will build the homes this country needs.”

Government’s are rather notorious for giving with one hand and taking with the other, so the details will matter, but for now it represents a massive breakthrough for councils. Unsurprisingly, it has gone down well at the Local Government Association (LGA), which represents councils in England and Wales.

“Today’s speech by the Prime Minister shows that the Government has heard our argument that councils must be part of the solution to our chronic housing shortage,” said Lord Gary Porter, the LGA’s chair.

“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 need.

“Our national housing shortage is one of the most pressing issues we face and it is clear that only an increase of all types of housing – including those for affordable or social rent – will solve the housing crisis.

“The last time this country built homes at the scale that we need now was in the 1970s when councils built more than 40% 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.”

Gavin Smart, director of policy and external affairs at the Chartered Institute of Housing, shared the LGA’s delight.

“This is excellent news and we look forward to seeing the detail,” he said. “We have been calling on the Government to lift the local authority borrowing cap to help councils build more genuinely affordable homes so it’s great to see the Prime Minister listening to the voice of housing professionals.

“If we are to have any hope of tackling our national housing crisis, councils must play a critical role and this move will help them reach their potential. But if course it’s not just a numbers game – we need to make sure we are building the right homes, in the right places, at the right prices. That’s why it is so important to give councils the tools they need to build more truly affordable homes for social rent.”

Ruth Davison, executive director of public impact at the National Housing Federation, said: “This is a very welcome decision by the Government. For years, everyone who builds affordable homes – both councils and housing associations – have argued this cap on council borrowing puts the brakes on building more homes.

“We know that we need to build 340,000 homes in England alone every year. Last year, only around 160,000 were built. We are so far off building the number of homes we need that councils and housing associations must be able to do more if we are going to solve the housing crisis.

“Housing associations are already working hard to build the homes that people need – this announcement will allow them to work more effectively in partnership with councils, pooling their resources and maximising their impact.”

Labour’s shadow housing secretary John Healey MP reacted to remind that the “devil will be in the detail”, tweeting:


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