Councils ‘must borrow more’ to accelerate house building

PHILIP HAMMOND’S plans to ease the housing crisis will fail unless he allows local authorities to borrow more money to build council houses, a powerful committee of MPS has warned.

The Treasury select committee said that a national cap on how much councils can borrow to build new homes should be abolished to kick-start a house-building revolution.

For the past 50 years, the private sector has built around 150,000 homes per year, half the government target of 300,000. When house building was at its peak in the late Sixties, around 420,000 homes were built, but almost half of those were built by councils, compared with around 4,000 council-built homes today. The committee said that only by allowing councils to borrow more would the Government be able to come close to its target.

At present, councils have to make a business case to central government for increased borrowing, with a national limit imposed to keep a lid on overall public debt.

In the November Budget, the Chancellor raised the national borrowing cap by £1billion to around £4.5billion, but that will have a limited impact on the number of homes that can be built.

Nicky Morgan, the Conservative MP and chairman of the committee, said: “The Chancellor pledged to ‘fix the broken housing market’, but the Government is going to find it very difficult to meet this ambition. The increase in the cap on borrowing for local authorities to build homes is a step in the right direction, but it doesn’t go far enough.

“The borrowing cap restricts the number of homes that local authorities could deliver. To achieve the government target of 300,000 new homes per year, the cap should be abolished. The potential of local authorities to build should be unleashed.”

Lord Porter, the chairman of the Local Government Association, said councils have a “vital role” in “solving our housing shortage”.

He added: “We have no chance of housing supply meeting demand unless councils can build again.”