Councils budget for 21% increase in spending on housing
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Housing will this year displace highways and transport as the largest area of council capital spending – following the lifting of the housing revenue account borrowing cap.
The government this week released figures showing English councils are predicting an overall 13% rise in capital spending in 2019/20 (to £28.0bn) compared to last year (£24.7bn).
The data show that councils are budgeting for an increase in capital spending on housing from £5.9bn to £7.1bn – a rise of 21% over the provisional outturn for last year.
With highways and transport capital spending set to fall from £7.1bn last year to £6.5bn, housing will now make up the largest of all budget areas.
Reacting to the news, John Bibby, chief executive of the Association of Retained Council Housing, said: “I suspect there is a strong connection to the lifting of the HRA borrowing cap.
“The lifting of the cap has enabled some of our members which already had building programmes in place to expand or increase those.”
Bibby predicted that the numbers would carry on rising in future years, once councils catching up from a standing start begin to develop new homes.
He said: “In authorities which previously had very little HRA borrowing headroom, the authorities are beginning to put new business plans in place.
“It takes time to get plans implemented and new build commissioned on site.
“For this reason, we expect the spending on housing to accelerate further.”
Chris Shepherd, director at housing consultancy 31ten, said the figures show “the appetite among local authorities to engage in housebuilding is growing and going forward that can only be a good thing.”
The statistics also reveal a massive surge in spending by London boroughs.
Councils in the capital are predicting spending £3.4bn – more than half the national total – on housing in 2019/20, 74% up on their 2018/19 outturn estimates.
Darren Rodwell, London Councils’ executive member for housing & planning, told Room 151: “These figures show boroughs’ commitment to tackling the capital’s housing pressures, which are the most severe in the country.
“With London accounting for almost two-thirds of England’s homeless households, boroughs are determined to build the homes our communities need.”
In February, Room151 broke the news that the London Borough of Haringey was budgeting for a £1bn capital funding programme for council housing over five years.
In October last year, Theresa May made the surprise announcement that the government would scrap the HRA debt cap in an attempt to unleash a new wave of council housebuilding.
However, not all of the additional spending will go towards building new homes, with a proportion, as in Haringey, likely to be allocated for repairs.
In addition, some councils – both within London and elsewhere – face large bills to replace unsafe cladding on the exterior of council blocks.
Rodwell said: “Boroughs have also spent significant sums on keeping their residents safe, with boroughs taking swift action to address fire safety concerns through vital remediation works on at-risk buildings.”
Overall prudential borrowing for capital spending by councils is set to rise from £9.3bn to £11.1bn this year, a rise of 20%.
Prudential borrowing overtook capital grants as the largest source of funding for council capital spending in 2017/18.
The Ministry of Housing, Communities and Local Government compiled last year’s data from Capital Payments & Receipts 4 (CPR4) returns, while the 2019-20 forecast data are derived from Capital Estimates Returns (CER).
