We haven’t seen the detail yet, but the Chancellor’s announcement on easing council borrowing caps seems to be much more about keeping the Lib Dems happy than about making any significant difference to numbers of affordable homes.
The plan is to increase borrowing caps by £300 million in total over 2015/16 and 2016/17, which means they will increase from a current £2.8 billion to £3.1 billion. In theory, this would be enough to build about 2,500 extra homes. Councils will have to bid for the extra borrowing capacity via their Local Enterprise Board. Under the plan, councils will make proposals to build new homes using the borrowing facility as part of their LEP when bidding to agree a Local Growth Deal with the Treasury. Ministers will then decide who gets the extra borrowing capacity, based on a value-for-money assessment. The government expects councils to put in public sector land, sell expensive housing assets and do deals with housing associations as part of their bids.
While this is good news, it’s pretty small beer for a sector that’s lost nearly 9,500 homes in the last 12 months through right to buy. Right to buy is being pushed further – Osborne announced there will be ‘right to buy agents’ to help buyers complete their home purchase and he’ll provide £100 million to increase sales by improving access to mortgage finance. So we could easily see another 10,000 sales per year as a result. And this happens to be precisely his rather optimistic assessment for how many new homes his relaxed borrowing caps could produce.
The chances are that the Treasury has ensured that its forecasts of right to buy receipts balance out the additions to the borrowing caps, and the whole exercise is fiscally neutral. For some reason the Office of Budget Responsibility hasn’t been rolled out to validate (or otherwise) the Autumn Statement, so we can’t know for sure.
What is certain is that deals involving land, asset sales and partnerships with associations will all take time to put in place. A 2015/16 start date may be optimistic. The number of easy pickings for sales of ‘high-value vacant stock’ will be limited. Not many councils have potentially valuable empty properties hanging around like those recently sold in Lambeth, despite tabloid stories along the lines of ‘Is this Britain’s most expensive council house?’ The danger is that it will encourage ever more dubious schemes like the notorious Earls Court project which involve knocking down occupied homes in places with high land values.
The LGA’s response that the announcement ‘does not go as far as we would like’ seems tame given that they had just repeated their call for borrowing caps to be abolished. CIPFA described the Chancellor’s move as ‘massively disappointing’ and the CIH said it was ‘far too modest and there is a risk that any gains could be offset by the requirement to sell high-value social housing and the expansion of right to buy’. Perhaps there is some good news in that borrowing caps are no longer sacrosanct, but a serious step is still needed either to abolish them or change the borrowing rules, or both, which could enable 60,000 more homes to be built over five years.
Which brings us back to the starting point. Unless the details when they appear offer something new, this looks like a bit of window dressing to give the impression of action when nothing much will happen and it won’t cost the Chancellor anything. Above all, it was no doubt part of some quid pro quo for Nick Clegg, which will enable him to claim to his party that he’s delivered on a conference pledge, while at the same time he’s probably signed up to something much more disastrous elsewhere in Osborne’s autumn package.