Blog: Scrapping the cap: Why the government u-turn on HRA borrowing is not a silver bullet to fix the housing crisis, by Unison's James Bull
The latest housing building statistics show that local authorities in England started building 1,630 new homes in 2017/18. Contrast that with the figure from 40 years earlier when local authorities started building 90,750 homes in 1977/78.
Throughout the twentieth century, local authorities were at the forefront of improvement in the design and construction of new homes - driving up quality, space standards and amenities while setting new agendas for environmental sustainability and energy efficiency.
Theresa May was right when she said that it didn’t make sense to stop councils playing their part in solving the housing crisis, but (finally) lifting the Housing Revenue Account (HRA) borrowing cap is a meagre response. Lifting the cap means that only some councils will be able to borrow more under the ‘prudential framework’ that allows councils to borrow provided they can demonstrate they have the revenue streams to repay the debt.
Only 160 of the 326 local councils still have an HRA, the rest have already sold off their housing stock to housing associations, encouraged by both Conservative and Labour governments to pursue ‘stock transfer’. So ‘lifting the cap’ won’t lead to a single extra home in more than half of local authorities. Early estimates suggest this might add an extra 10,000 homes a year – not much of a dent in the 340,000 new homes that are needed each year.
While the government directs subsidies to promoting home ownership, spending billions on ‘Help to Buy’ (and evidence grows that this public subsidy is inflating new build prices and the profits of major private developers), financial contributions to building new ‘social rent’ housing are noticeably absent. Homes England reports just 1,409 starts on site for new ‘social rent’ housing in 2017/18.
For the last 30 years local authorities have been confined to an influencing role with housing developments in their areas, merely seeking to ensure developments contribute to meeting local housing needs. As a consequence, local authorities now lack the in-house teams of architects, engineers and others needed for the construction of new homes. Lifting the borrowing cap means that (some) local authorities could now create a proper housing development workforce – and set the agenda for local housing delivery once more. But a long-term strategy to achieve this is critical if councils want to ensure that it is the public sector (not the private sector) that ultimately benefits from any opportunity that lifting the borrowing cap now offers.
The private housing development sector already has a poor track record of delivering affordable housing, often using viability assessments to dramatically reduce the numbers required by the local authority. This is why publicly owned and managed council housing is still such an attractive solution for delivering affordable homes in large numbers. It is not dictated by profit and responds directly to the local housing need of a community.
Finally, there are still numerous policies in place which are not consistent with a drive for a new generation of council housing that urgently need reform. They include Help to Buy, Right to Buy and the rules for land compensation. When these are taken into consideration along with the issues raised above, it’s clear that this new borrowing power is only one small step in the right direction.
UNISON wants to see the government go further, by reforming the funding regime to ensure that councils are supported with an adequate housing subsidy to enable them to build at scale again.
UNISON also wants to see councils given the support and resources they need to develop and upskill their own housing development workforces. There is an opportunity here for better use of apprenticeships to attract young workers and to better develop existing staff - both within housing services and across a variety of other council services. But this will require resources and investment - supporting councils to rebuild the kind of housing development workforce that they now sorely lack.
Contact officers at Unison are James Bull, Assistant National Officer; Pete Challis, Policy Officer; and Sylvia Jones, Assistant Policy Officer. For further information visit: https://www.unison.org.uk/at-work/community/key-issues/housing/