At the Conservative Party conference, Theresa May announced that the UK Government would be lifting the cap on the amount of money that Local Authorities can borrow to build social housing.
The Housing Revenue Account (HRA) borrowing limit has to date prevented some of the country’s largest Local Authorities from building more housing during a period when we need 340,000 new homes per year to address the current housing crisis.
Since its introduction in 2012, the cap has been in place to control Local Authority borrowing and a subsequent impact on national debt. The cap has, however, always been an artificial one as it never reflected the true value of the assets borrowed against.
Social Housing has been developed to date at a small scale through either the Private Finance Initiative, stock transfer or authorities setting up separate entities. The lifting of the cap can now add serious scale to the development of social housing across the UK.
There is a significant opportunity for Local Authorities to play a key role in adding volume to the market through the development of affordable housing, proving a much-needed opportunity for people to take their first step on the housing ladder.
To build housing at the pace and scale required, there needs to be a consolidation of public sector land and maximised use of Modern Methods of Construction (MMC), such as modular building. The volume of affordable housing which could be developed by Local Authorities on a regional basis has the potential to provide a much-needed pipeline for MMC manufacturers, driving production costs down and securing MMC as a key contributor to solving our housing crisis.