Theresa May’s flagship policy to solve housing crisis will deliver no new homes in half of England

Exclusive: Ministers admit half of local authorities stand to miss out on billions of pounds of funding for new low-cost homes

Benjamin Kentish
Political Correspondent
Sunday 04 November 2018 20:36 GMT
The government must 'step in' if homes are going to get built, Theresa May says, committing £44bn to supporting the housing market

Theresa May’s flagship policy for sparking a revival in council housebuilding will not deliver a single new home in more than half of the local authorities in England, The Independent can reveal.

Some of the most deprived towns and cities with the greatest need for new homes, including Liverpool, Bolton and Wakefield, are among areas that will miss out as a result of changes that will only benefit some councils.

The prime minister used her speech to the Conservatives’ annual conference last month to announce a major change that will see the government scrap restrictions on how much councils can borrow to fund housing.

She said: “Solving the housing crisis is the biggest domestic policy challenge of our generation. It doesn’t make sense to stop councils from playing their part in solving it.”

No 10 said the move would allow councils to build up to 10,000 new homes a year for low-income families, as councils scale up borrowing by £4.6bn.

However, ministers have admitted that less than half of councils have the type of account that will allow them to increase their borrowing.

Only 160 of the 326 councils in England with responsibility for housing have housing revenue accounts (HRAs), the Ministry of Housing, Communities and Local Government said.

The revelation will prompt fears that people in areas with a desperate need for new homes will lose out, while those in neighbouring areas could benefit from a boom in housebuilding.

Councils set to miss out on the potential funding boost include several with some of the longest housing waiting lists in the country.

Authorities that will be unable to borrow more include Bolton, where 25,600 households are on the council waiting list – the third highest in England – and Wakefield, the sixth highest with 20,600 families waiting for a home.

Liverpool, which has the 11th longest waiting list, totalling 16,500 households, will also miss out.

The Independent has revealed that the government spending watchdog believes the lifting of the HRA cap will deliver far fewer new homes than Downing Street claimed.

The Office for Budget Responsibility (OBR) said the move would result in fewer than 9,000 new homes over the next five and a half years – a fraction of the 10,000 per year predicted by ministers.

While it will allow councils to build 20,000 new homes – around 3,600 a year – the OBR said this would be offset by fewer homes being built by housing associations, meaning the net total is just 9,000.

Many councils have already transferred their housing stock to a housing association and closed their housing accounts, meaning they will miss out on the ability to use their increased borrowing powers to fund thousands of new homes.

In response to a parliamentary question from Labour, housing secretary James Brokenshire said: “There are 160 local housing authorities without a housing revenue account, as they have transferred their housing stock to a housing association.”

Governments have long encouraged councils to close their housing accounts and transfer their homes to a private body because, unlike council borrowing, housing association debt has traditionally not been included in national debt figures.

Under current rules, councils must own 200 homes before they are allowed to open a housing revenue account, creating an obstacle for many that might now wish to do so. Authorities are also likely to have lost their housing expertise when they transferred their properties to a housing association.

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John Healey, Labour’s shadow housing secretary, called on ministers to ensure all councils have HRAs so they can borrow to build new homes.

He said: “Councils led by all political parties want to build big but ministers are failing to give them government’s full backing.

“Half of all councils have no council homes left and no capacity to build – ministers should back these areas to set up and start building again, as Labour has proposed.”

Mr Healey also called for the controversial right-to-buy scheme to be halted. Critics say the policy acts as a disincentive to housebuilding because councils know that any homes built are liable to be sold off to tenants.

He said: “If councils’ new borrowing freedoms are to count in helping to fix the housing crisis, then the government must also suspend the right to buy to stop homes being lost faster than they can be built, and boost central funding for local areas to build again.

“Both Labour and Conservative governments did this in the decades following the Second World War.”

A Local Government Association spokesperson added: “Several councils will have chosen in the past to transfer housing stock and will be working with registered providers to build affordable homes.

"However, if the policy is to reach its potential for everyone, councils without an HRA also need the opportunity to help build more of the new homes this country needs to help government meet its target of building 300,000 homes a year.”

Lifting the cap on councils’ HRA borrowing has been a demand of local authorities for years, and was warmly welcomed by town halls.

However, ministers are now likely to face calls to ensure that people across the country benefit from the change, and take steps to stop some deprived areas completely missing out.

Councils in England are legally obliged to kept their housing finances separate from the general fund they use for other services.

They are able to use this account and the revenues they earn from rents and sales to borrow money to fund new homes.

However, central government has previously set strict limits on how much councils are allowed to borrow, to ensure they do not put their financial stability at risk or drive up national borrowing figures.

A Ministry of Housing spokesperson said: “We have abolished borrowing restrictions, freeing councils to double building from around 5,000 to 10,000 homes per year by 2021-22. This move forms part of our overall mission to build more, better, faster.

“Local authorities that have transferred their housing stock to a housing association can already borrow in order to build the homes their communities need. If such councils want to get on and build they can do so, and once they have built more than 200 homes they can open a housing revenue account.”

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