Councils say they must borrow to build

December 1, 2017 / Isla MacFarlane
Councils say they must borrow to build

Cllr Nick Forbes, Senior Vice-Chair of the Local Government Association, has urged the government to allow all councils to borrow to build, in an appearance before the House of Commons’ Treasury Select Committee.

Last week’s Budget saw the Government pledge to allow some councils with “high affordability pressure” to be able to bid to borrow up to an additional £1 billion on housing revenue accounts, but the LGA has consistently called for the cap to be lifted in its entirety, with no conditions attached.

Cllr Forbes argued for the Government to lift the cap across the board, saying that previous attempts to link stringent conditions to such a measure had failed to deliver any homes. The upcoming Local Government Finance Settlement would be an ideal opportunity to lift the cap.

Both the National Housing Federation and the Federation of Master Builders backed the Local Government Association in their call to allow councils to borrow to build new homes, without further restrictions, whilst appearing alongside Cllr Forbes at the committee.

In addition, Cllr Forbes argued for councils to be able to keep 100% of their Right to Buy receipts, and for planning departments’ cost of applications to be covered by funding from central government.

In his remarks at the House of Commons Treasury Select Committee, Cllr Nick Forbes said, “It’s better to just lift the housing borrowing cap for all local authorities, so that we can all get on and take the decisions that are in the interests of our respective communities.

“We have a situation where most of the borrowing caps for local authorities are operating under twenty per cent of their cap, so the flexibility to manoeuvre is very limited.

“The government’s indication in the Budget of £1 billion for housing revenue accounts goes some way towards helping tackle our housing shortage, but I don’t think it is necessarily going to meet the scale of the challenges we face.

“There wasn’t an announcement in the Budget, as far as I saw, about Right to Buy receipts, and that’s another one of the issues that I know exercises local authorities. Currently, we only retain thirty per cent of the Right to Buy receipts and the rest goes to the Treasury.

“Our argument would be that we should be allowed to use 100 per cent of the receipts from Right to Buy sales to invest in new homes.

“Where I’ve seen delays in the planning system, it’s been arguments between developers over particular pieces of land and access rights and so on, and that has held up delivery, but I don’t see the planning system as the barrier here, in terms of delivering the new homes that we want.

Speaking following the Committee appearance, Cllr Forbes further stressed, ahead of the upcoming Letwin review into the topic, that councils need to be given the powers to make sure that developers complete homes on sites which have received planning permission.

“Council planning departments currently approve nine in 10 applications,” he said. “Our estimates place the number of plots with planning permission that have yet to be turned into built-out homes at approximately 400,000.”

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