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Government to lift borrowing cap on council property build spending

Property estate

The property industry has widely welcomed the announcement by Prime Minister Theresa May, that the Government will allow councils to build many more homes.

During the Conservative Party conference in Birmingham, The Prime Minister said that housing is ‘the biggest domestic policy challenge of our generation’ and acknowledged that local authorities were being restricted from building by budgetary constraints.

May said the Government will discard the existing rules on how much councils can now borrow against the value of their housing stock, which was implemented in 2012.

Federation of Master Builders (FMB)

Brian Berry, Chief Executive of the FMB, said: “This is the most exciting, and potentially transformative, announcement on council housing for many years. It is something the house building sector and local authorities have been crying out for since the last economic downturn as a means by which to increase house building.”

Berry goes on to say that it was only when the UK had a thriving council house building program that enough homes were being built. He said that had local authorities not had this ‘artificial’ cap on their borrowing, they would be keen to directly fund projects. He comments: “In a victory for common sense, Mrs May has now signalled that the borrowing cap will be scrapped to allow councils to build many more new homes.”

Berry continued: “We believe this could also have the added benefit of expanding the capacity of the private sector by providing more opportunities for SME builders. In this way, a stronger public sector house building programme can complement and help support a stronger, more diverse private sector.”

He believes that the private and public sector need to work together to deliver the number of new homes that the government is hoping for. The public sector will of course always take the lead in delivering new homes but that the public and private sectors needs to both be “firing on all cylinders”.

Berry concluded: “However, as much as this is a bold and praiseworthy move by the Prime Minister, new homes of any sort will not get built if we as an industry don’t have the people we need to build them. Recent announcements on post-Brexit immigration rules, if implemented as currently understood, will be a serious threat to our ability to deliver on the promise of this policy. The failure of the Government so far to listen to the construction industry could unfortunately threaten the delivery of the Government’s increasingly bold moves to solve the housing crisis.”

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