Blimey- build, councils, build!

I went to a soft play this morning, fresh with the idea that whatever anyone else has been saying at the party conferences, one person I probably didn’t need to listen to very hard was the current Prime Minister. Well, that’s me schooled.

Details are still light on the PM’s pledge to scrap the housing revenue account borrowing cap, but for those of us who have been pushing for this change it is certainly welcome. Certainly a major sea change was that councils (both individually and through the LGA) started talking in unison. It shows what can be achieved when councils are united instead of being divided and ruled. Could a similar thing happen with social care or fiscal devolution, I wonder?

The SHOUT campaign should also get some of the credit for making the intellectual case so clearly and I suspect that the presence of Toby Lloyd in number 10 has managed to make a positive difference in entrenched thinking.

In my post before last year’s budget I went through why it is a difficult sell to the Treasury. Essentially, in letting councils (and financial markets) choose when they can borrow to build new homes they are spreading macroeconomic power around. The Treasury is not always good at trusting other people with economic levers. Councils may choose to borrow at the wrong time, both for the real economy or for the government’s accounting. Councils are also unlikely to spread around the kudos when they are allowed do something off their own bat. So it looks like the Treasury has been overruled, which can only really happen by very senior ministers (PM or Chancellor) making the decision above permanent civil servant advice.

There is also the issue that past this first flurry, central government won’t get the plaudits for allowing councils to build. I doubt the housing minister will be invited to cut the ribbon on housing that councils have built with debts they have taken on against their own assets.

The important thing now for stock owning councils is to prepare their plans quickly. It is not yet clear when this change will actually be made (it wouldn’t take much time, but I wonder if there is some small print about the start of the next financial year or even the next spending review to come). Given what certain other leadership wannabes said about social housing, it will be interesting to see if the timescale means the change could get lost in conservative internecine warfare. Labour have already stated that they will raise the cap to the prudential limit, so there is, for now, cross party support for this change.

But it is worth remembering that many councils have transferred their housing stock, so if they wish to build again they may have to either consider borrowing off other assets (maybe not quite remortgaging the town hall!) which might be tricky in accounting terms or seeing whether the government can provide some starter funding or borrowing to set the ball rolling. Let’s make no mistake, this is a policy that pays for itself relatively quickly, but a nudge might be required to help some on the way.

Another issue is the vexing role of land. Many local authorities have land, but are being pushed into selling land thought of as ‘surplus’. Indeed, the planning changes proposed earlier in the week (from the same lectern) include further speeding up of that process. If councils are going to be able to utilise the extra borrowing capacity well then building on their own land would be the cheapest way to do it. Otherwise, they will be competing with private builders and housing associations with strategic partnership funds and who knows who else for the same bits of land. Escalation of the bidding war is the last thing our land market needs- councils with land suitable for housing should be encouraged to use this first, not sell it quickly under duress and use the cash to buy part of a smaller site elsewhere.

Then of course there is right to buy. If councils are building a new load of affordable homes -let’s hope truly affordable homes– then they need to be able to do so in the confidence that they will still own them when the loan is paid off. Indeed, this is something funders or economic sense might insist upon. Building homes for a low rent works because the home lasts longer than repaying the borrowing costs- eventually they provide a surplus to fund housing management, repairs and, you guessed it, more building. Right to buy cuts that off at the knees, especially as new homes are more likely to be attractive to borrowers (especially with a higher eventual sales price) to lend to council tenants than older properties. Flogging them off with a discount makes no sense for society and it needs to be stopped. Yes, right to buy is a conservative shibboleth, but times change and if they are interested in seeing more council homes then right to buy needs to end.

Many councils haven’t really been in the building game for a generation. A few homes here and there have been the preserve of even some of the larger local authorities. So if everything happens according to plan they will need to build up their capacity in planning and construction, whether this is through directly managing projects (my preference) or outsourcing and contract management. There is an opportunity here for councils to really get back into a key part of building a more mixed and egalitarian society. Those who are slow off the ground risk either missing their chance or lagging behind whilst others benefit.

I say ‘missing their chance’ because a change on paper can be changed back very easily. Whatever else, Theresa May is still desperately weak and if this is something that has her name alone on it then it could fall when she does. I do not doubt that the true believers in the Treasury would like to change this back as soon as possible. As I’ve said, this is not just for the accounting reasons but because giving macroeconomic power to a bunch of town halls is simply not the change they want to see.

I think we have to be clear that if councils are not seen to take this opportunity they could face losing it. The case, to so many so obvious for so long, has been won for the present but there are dangers that it could be either undermined or lost in the future. The best way to prevent this is to show what can be done to create genuinely high quality homes for a sensible rent that pays for themselves. It has been done before. Councils just need to be ready, dust off those plans, make some more and get going.

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