Borrowing cap changes

by Jo Pitt, Principal Advisor Local Government

The housing measures announced in the Budget made the headlines in most newspapers. This is because housing is a key policy area for all political parties and both relevant and understandable to voters who have heard Phillip Hammond say he wants to build 300,000 new homes. 

Big challenges require deep pockets and the £15bn of new money that was promised will not be enough to fix the broken housing market. That said, the chancellor did not focus totally on home ownership this November. While the removal of stamp duty for first time buyers would have been good news for some, for many, home ownership is still a dream and so it is important to look at the other areas of the housing announcement.    

So looking at where the £15bn has been allocated we see the following:

• £8bn of guarantees to support housebuilding
• £2.7bn extra capital funding for the housing infrastructure fund
• £1.5bn of loans for small and medium-sized builders
• £1.1bn to develop sites and regeneration schemes
• £1bn for lifting the borrowing cap for certain councils
• £630m cash to accelerate the building of homes on small, stalled sites.

While all extra money is welcome, the interesting announcement for CIPFA is the lifting of the borrowing cap. This flexibility has been consistently requested by CIPFA for many years and in 2016 we wrote a detailed policy paper called Investing in Social Housing, including an explanation of why this was important if house building was ever to deliver the number of units required.

Along with others we argued that if borrowing constraints are removed or relaxed this will allow local authorities the freedom to increase their borrowing and therefore increase their capacity to build. Not all local authorities will want this freedom or have demand pressures that require them to build, but for those that do the ability to provide more homes is important.