75% of councillors want borrowing cap abolished

A think tank has found that 75% of councillors with a lead role in housing want the government to abolish the current cap on borrowing under the reformed Housing Revenue Account (HRA) regime.

In addition, 78% said that if their borrowing headroom was to double they would use the extra capacity to build new council homes.

The online Smith Institute survey “Does Council Housing have a Future?’’ quizzed 45 councillors about the effectiveness of the revised HRA system, introduced over 18 months ago to enable councils to self-finance build programmes outside of central state control.

It found the mood among councillors from all political parties was generally optimistic with 93% planning to build new council homes under HRA. Of those planning to build, 60% said new build council housing was their main investment priority, followed by “decent homes” at 18%.

However, the report found that aspirations to build over the next 10 years were relatively modest: 43% of councillors said they planned to build between 101 and 500 units; 24% planned between 501 and 1,000 units; 19% between 1 and 100 units; and almost 10% said more than 1,000 units.

And in a split opinion, nearly 40% of councillors thought that over the next 10 years new build social housing would not compensate for the loss of existing council homes, whereas 37% said it would provide additional homes.

When asked how their council intended to finance new build social housing, around three quarters of respondents said they would mainly be using HRA borrowing headroom, defined as the gap between existing HRA debts and the borrowing cap imposed on them by government to help protect the UK debt crisis. For example, London has a total HRA debt of £6.4bn and a borrowing cap of £7.8bn, leaving borrowing “headroom” of £1.4bn.

Small councils were found to be less strongly in favour of abolishing the debt cap (57%) compared to larger councils (86%).

One councillor commented: “We need to see a lifting of the HRA debt cap, explore how to spend more of the housing benefit funding on bricks and mortar, and a strong commitment to the continuation of central government grant.”