• Home
  • About
  • Subscribe
  • LATIF
  • Conferences
  • Dashboard
  • Edit My Profile
  • Log In
  • Logout
  • Register
  • Edit this post

Room 151

  • 151 BRIEF

    What's New?

  • Slough welcomes commitment that Office for Local Government ‘will not be a burden’

    June 30, 2022

  • Homes England agrees strategic partnership with two authorities

    June 29, 2022

  • Soaring inflation and pay pressures to add £3.6bn to council budgets

    June 28, 2022

  • Underfunded social care reforms could ‘exacerbate workforce pressures’

    June 27, 2022

  • Nottingham City Council leader labels proposed intervention as ‘disappointing’

    June 27, 2022

  • Government preparing to intervene in Nottingham City Council

    June 23, 2022

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews
  • Briefs

May scraps the HRA cap in bid to tackle housing crisis

0
  • by Colin Marrs
  • in 151 News · Development
  • — 4 Oct, 2018

Prime minister Theresa May has announced the government is to scrap the housing revenue debt cap, a move which it says could allow councils to borrow to build 10,000 homes a year.

May made the surprise announcement at this week’s Conservative Party conference in Birmingham, following years of pressure from the local authority sector.

She said that councils have a big role to play in increasing the number of homes built, but that the HRA, currently capped at just over £30bn, with individual caps for each authority, was holding them back.


Housing & Regeneration Finance Summit
October 31st, 2018, London Stock Exchange
150+ finance professionals from councils, housing associations, investors & developers
Places still available on the dedicated TREASURY STREAM
How will removal of HRA cap impact development plans at your council?


She said: “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.

“So today I can announce that we are scrapping that cap.”

A report produced by the Association of Retained Council Housing (ARCH) in 2013, estimated that lifting the cap could result in councils borrowing an extra £7bn for 60,000 additional homes over a five-year period.

Speaking to Room151, ARCH chief executive John Bibby, welcomed May’s announcement.

He said that, along with recent proposals to allow councils more flexibility on Right to Buy (RTB) receipts and the lifting of the freeze on social rent rises, councils will be able to plan for new homes with more certainty.

He said: “All of these announcements take us back to the position before 2012. Councils will have a large degree of certainty and can plan on future rental income, debt charges and make judgements on risk to produce fully-costed 30-year business plans again.”

But Bibby warned that some councils face challenges in making full use of the new flexibility.

“You have got to factor in the price of buying the land, although councils might be able to charge higher rents to cover the higher borrowing required.

“At the other end of the spectrum, Right to Buy discounts in areas of low house prices might attract high take-up and leave councils with very small net receipts from the sales. If they think they can’t might make things stack up, they will think twice about borrowing.”

Darren Rodwell, London Councils executive member for housing and planning, said: “We pledge to use this new freedom to play a bigger role in delivering the housing that Londoners so desperately need and look forward to working with government in making it a reality.”

Rob Whiteman, chief executive of CIPFA, said: “We have to look at the small print but very clearly it is a very significant move.

“We have waited for decades for the Treasury to lift the borrowing cap. It has always struck me as perverse that councils can borrow to invest in commercial property elsewhere in the country but not for social housing in its own area.”

A lifting of the cap could also help councils who have been forced to hand back right to buy receipts in recent years because they are close to their cap, according to the experts.

Bibby said: “You can only spend 30% of your right to buy receipts and match fund the rest. Now councils lose to the cap will be able to borrow to do so.”

Councils currently borrow through the Public Works Loan Board to fund new HRA homes. There is currently £15bn of headroom left until councils reach the current cap of £85bn.

Lord Porter, chairman of the Local Government Association, said: “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.”

May’s announcement comes just days after bidding closed for a share of a £1bn increase in the borrowing cap, spread across three years from 2019-20, announced in the 2017 Budget.

The government said that cap will be lifted as soon as possible, with further details confirmed in the Budget.

Get the Room151 Newsletter

Share

You may also like...

  • ‘Extreme’ Prudential Code will impact reserves, warns Mike Jensen 9th Mar, 2022
  • New intervention powers and borrowing restrictions ‘credit positive’, says Moody’s 7th Jun, 2022
  • Don’t expect an infrastructure levy any time soon 21st Apr, 2022
  • Room151 launches survey on IFRS 9 override and MRP impact 9th May, 2022

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • 151 BRIEFS – WHAT’s NEW?

    • Homes England agrees strategic partnership with two authorities
    • Soaring inflation and pay pressures to add £3.6bn to council budgets
    • Underfunded social care reforms could ‘exacerbate workforce pressures’
    • Nottingham City Council leader labels proposed intervention as ‘disappointing’
    • Government preparing to intervene in Nottingham City Council
  • Room151’s LGPS Roundtables

    Biodiversity
    Valuations & Risk
    LGPS Women

  • Room151’s LGPS Roundtables

    Biodiversity
    LGPS Women
    Valuations & Risk
  • Latest tweets

    Room151 4 hours ago

    Hillier confirmed as keynote speaker for LATIF/FDs’ Summit: Dame Meg Hillier, chair of the Public Accounts Committee, has been confirmed as a keynote speaker for Room151’s combined Local Authority Treasurers Investment Forum (LATIF) and FDs Summit. The… dlvr.it/ST70F7 pic.twitter.com/hxV676Iley

    Room151 4 hours ago

    Councils’ funding at risk due to ‘undercounting’ in census data: Population estimates in London and Manchester may have been significantly underestimated in the 2021 census potentially threatening government funding for frontline services in these… dlvr.it/ST707J pic.twitter.com/VncIyaXa01

    Room151 2 days ago

    Gove at LGA: councils to receive two-year financial settlement: Michael Gove has announced that councils will receive a two-year financial settlement from next year to provide authorities with “financial certainty” and allow them to plan ahead. The… dlvr.it/ST0kSV pic.twitter.com/wxL3UM4sGO

    Room151 2 days ago

    LGPS valuations: the digital journey: Rob Bilton explains how technology is helping to deliver one of the most complex data exercises in the world of public sector pensions. The 2022 valuations for LGPS funds in[...] dlvr.it/ST0kMq pic.twitter.com/VxjSPC2Uvo

    Room151 6 days ago

    Conrad Hall: ‘more sophisticated’ regulation needed for local government: The chair of the CIPFA/LASAAC Code Board has questioned the sophistication of financial regulation in local government and the continuing focus of the Department for Levelling Up,… dlvr.it/SSnPBV pic.twitter.com/G5d7JCWF8c

    Room151 1 week ago

    Slough Council approves plans to restructure finance department: Slough Borough Council has approved plans to restructure its finance department to enhance capacity and capability and to address a “significant weakness” in the function. The local… dlvr.it/SSf8DG pic.twitter.com/l5lmyHmkBg

  • Register to become a Room151 user

  • Previous story Sector slams Hancock’s ‘short-term’ social care fix
  • Next story The only way is ethics

© Copyright 2022 Room 151. Typegrid Theme by WPBandit.

0 shares