MPs: Councils should have greater capacity to borrow to build more homes

29 Apr 17

Housing revenue account borrowing caps should be reviewed to allow local authorities to build more homes, the Communities and Local Government Committee has said.

In a report out today the committee stated the “broken” homebuilding sector is dominated by a few large firms and this needs to addressed if enough homes are to be built to meet the country’s growing need.

MPs called on more support to be given to smaller firms and local authorities when it comes to homebuilding as they are “alarmed” by the dominance of the big building firms who are “driven by commercial self-interest and with little incentive to build any quicker”.

The number of small builders (1-100 units per year) has fallen from 28% in 2008 to 12% in 2015. The market share for medium builders (101-2,000 units a year) has fallen from 40% to 29%, while the share for high-volume builders (2,000 plus units a year) has risen from 31% to 59%, according to government figures.

Today’s report calls for increased building by local authorities and housing associations, as MPs say it will help protect the sector against economic downturns.

English local authorities built 135,700 homes in 1969-70, according to figures in the report, but this collapsed steadily until 1999-2000 when just 60 homes were completed.

There has been a slight increase since then but in 2015-16 only 1,890 homes were built by local authorities.

The committee said borrowing caps on councils’ housing revenue accounts (HRA) are limiting their ability to build and should be raised or, in the areas where housing affordability is at its worst, removed.

In 2013 the government raised the HRA borrowing headroom by £300m but only around half of that was taken up. MPs say they believe this was the case because some councils were wary of borrowing at a time of austerity.

Clive Betts, chair of the Communities and Local Government Committee, said: “The housing market is broken, we are simply not building enough homes.

“Local authorities have a key role to play but have not been given the tools they need to make an effective contribution to solving this crisis.”

He said smaller builders were in decline and the sector was over reliant on an alarmingly small number of high volume developers, "driven by commercial self-interest and with little incentive to build any quicker".

“If we are to build the homes that the country so desperately needs, for sale and for rent, then this dominance must end,” Betts stated.

He stressed the need for a competitive housing market, with a variety of developers, providing a range of housing and rental stock.

Today’s report follows a Public Accounts Committee study on Friday, which highlighted the government's ambition to build 1m homes by 2020 does not go far enough to meet the UK’s housing need.

Last week Labour also announced a pledge to build 1m homes over the next parliament, with 500,000 of those being council properties.

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