The Ministry for Housing, Communities & Local Government has finally announced how it intends to raise the housing revenue account borrowing cap by a total of up to £1billion in areas of high affordability pressure for local authorities that are ready to start building new homes.
Local authorities in England outside London will be able to bid for increases in their caps from 2019 to 2020, up to a total of £500million by the end of 2021 to 2022. The government states that the programme will help to deliver an increase in council housebuilding. A separate programme of £500million will operate in London with the Greater London Authority expected to announce how this will work soon. Of the total, £400million will be available in 2019/20, £300million in 2020/21 and £300million in 2021/22.
A prospectus inviting eligible local authorities to bid for additional borrowing under this programme was launched in June 2018, along with instructions to local authorities about the bidding parameters. The deadline for submitting bids is 5pm on Friday 7th September 2018.
However, the new borrowing flexibility for new council homes will be limited to areas where private rents are at least £50 a week more than social rents and the government has identified the 168 local authorities that meet this criterion. Councils will be able to use social housing grant, capital receipts and prudential borrowing to fund the new build. New homes will have to be social, affordable or shared ownership. The scheme cannot be used to fund housing that will be held by a local housing company, joint venture or other arms’ length vehicle.
Bids will be assessed for value for money, deliverability and affordability and the bids that attract the highest scores will be prioritised.
Homes England has also announced an increase of £1,670million in the social and affordable housing programme for England outside London that follows the additional funding that was provided for London in March 2018. This takes the form of an addendum to the Shared Ownership and Affordable Homes Programme 2016 to 2021.
In his foreword to the prospectus, James Brokenshire MP, the Minister for Housing, Communities & Local Government wrote that:
“Like the Prime Minister, I want to see a new generation of council house building. Historically, local authorities have been a driving force in council house building in this country. You have the land, the planning responsibilities and you know what your communities need.
“Crucially, you also have the ambition. Local authorities often say they would build more houses, if only they could borrow more money. There are also repeated calls for greater flexibility when it comes to using this money. You have been keen to build, but held back for too long. We are listening and taking action.
“Last year the Chancellor said we would lift the Housing Revenue Account caps for councils in high-demand areas. Today, I am also enabling councils to combine borrowing with AHP grants or Right to Buy Receipts, so the money goes even further. This prospectus outlines a long-awaited chance for local authorities to show the government what can be achieved when money is there.”
The purpose of this briefing paper is to summarise the government’s prospectus, Homes England’s addendum and the reaction to them of the sector and to provide some commentary.
The Civic Centre in Newcastle-on-Tyne. Newcastle is one of 168 local authority areas that will be eligible under the new programmes for additional council borrowing and social homes.
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