Why would Inside Housing want to attack the idea of councils having more borrowing power to build new homes? After all it runs campaigns like Grant Britain Homes that call for more investment in affordable housing. Yet it’s just labelled the demands for greater borrowing freedom a False and dangerous myth. The opinion column accompanies a piece of research which used Freedom of Information requests to find out how councils were using their current borrowing ‘headroom’. The data show that councils like Wigan and Kirklees had £45 million of unallocated borrowing power and that many others had not yet borrowed up to the maximum of the ‘caps’ set by government when self-financing began in April 2012.
There seem to be no problems with the data (although individual councils might have issues with how they’ve been reported). The problem is that a story about how the early stages of self-financing for councils are working out has been turned into an opportunity to try to rubbish the case for changing the borrowing rules.
The argument seems to hinge on the fact that ‘most of the £2.9 billion of investment already available is untapped’. That’s to say, in February, just 22 months after self-financing began, councils hadn’t yet borrowed to the maximum they will be allowed to borrow (if nothing changes) for the next 30 years. Well, that’s hardly surprising, is it? Even those many councils who are bursting to build new homes are hardly likely to have got new developments on site in less than two years. The fact that there was an upsurge in council starts in the first quarter of this year is probably still down to earlier grants made available by the HCA, rather than councils’ expanded programmes after self-financing began.
While it’s true that a number of councils don’t yet have firm plans to build, that’s not surprising either. Demand and needs will be different across the country: in some cases demand may be limited, in others investment in the existing stock is the priority, and others may have used up their available supplies of land. Undoubtedly, too, there is a degree of caution in the face of welfare reform and spending cuts that have hit other council services. But neither the purpose of a change in borrowing rules nor the forecasts of possible outcomes depended on all councils using their full borrowing headroom, much less within such a short time.
Strangely, in another article by the same journalist Keith Cooper, this time for the Spectator, with the provocative title Why Owen Jones is wrong on housing, he points out (correctly) that around half of councils have less than £10 million borrowing headroom. The ignorant reader might think this is a lot of money, but of course – even if all spent on new build – it would barely amount to 100 new homes over the course of 30 years, quite apart from finance needed to improve the existing stock. Perhaps inadvertently, he adds to the case that Red Brick and others have long been making, that the borrowing caps are far too restrictive. His other results confirm that, in addition, they are arbitrary in their effects, with some councils having no spare borrowing capacity at all and a large number only having enough for the investment they need to make in their own stock.
But the problem about the Inside Housing (and Spectator) pieces isn’t the detail – it’s the overall message that the need for more borrowing power is a ‘myth’ and those calling for it are ‘misguided’. In a robust response, Tom Copley, Labour spokesperson at the GLA, pointed out that even Cooper’s figures show that six out of ten councils badly want to build more homes, and many are held back by the borrowing caps. Keith Cooper and Inside Housing are to be praised for their detailed research on this and other issues about local authority housing finance, but they should be much more careful how they present their findings. Those who are opposed to building more council houses or who doubt local government’s ability to spend wisely will be only too quick to make use of alarmist articles like those that appeared last week.