Council housing boom ‘could generate £320bn for economy’

29 Oct 18

Councils could generate up to £320bn for the wider economy in England and Wales over the next 50 years if they were given the investment in the Budget today for a “new generation” of social housing.

This would be as a result of construction revenues for council house building largely remaining in the domestic economy, the Local Government Association has estimated.

The LGA said it wants to see 100,000 high-quality social homes built every year now the HRA borrowing cap is to be lifted. It called on the chancellor to “deliver a once-in-a-lifetime change” in Budget today and invest in council housing.

Theresa May pledged to scrap the borrowing cap at the Conservative Party Conference at the start of this month. The cap will be removed by the end of this month.

Lord Porter, chair of the LGA, said: “The last time we built enough homes councils built 40% of them. We need to get back to those levels if we’re to tackle our housing crisis, which is why we need to look towards delivering a new generation of 100,000 high quality social homes a year.

“The gains are enormous. Investments in social housing could generate returns up to £320bn over 50 years, helping countless families along the way by creating local jobs and building homes people need and can afford.”

Government figures have show that in 2017 local authorities were responsible for just 2% of total houses built in the UK. 

Analysis by the LGA looked at four separate future economic scenarios and found that in the worst-case a council housing spike would generate a £102bn return for the economy.

A separate study by research group Capital Economics, commissioned by the LGA, found that every £1 invested in a new social home generates £2.84 in the wider economy and every new social home would generate a saving of £780 per year in housing benefit.

The research also showed that every new social home would generate a fiscal surplus through rental income.

The LGA has long called for the scrapping of the HRA cap and Porter said: “[Today], the chancellor has a real opportunity to deliver a once-in-a-lifetime change that could benefit thousands of people across the country. We encourage him to take it.”

Rob Whiteman, chief executive of CIPFA, said: “It has been an unfortunate irony that councils can borrow for commerical investment purposes outside their own boundaries, but cannot borrow to build much needed homes within their areas. 

“Housing has been the biggest government policy failure over 30 years, significantly contributing to social discord and breakdown in public trust.

“Removing the HRA cap is a step in the right direction, providing councils with flexibility to respond to local demand, to borrow prudentially and invest in homes for the future.”

John Perry, from the Chartered Institute for Housing, called for accounting changes to accompany the HRA cap lift in his blog for PF.

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