New Liberal Democrats leader Vince Cable has called on the Government to allow local councils to borrow to build.
Cable used his inaugural Party Leader’s speech at the Liberal Democrats’ Conference to challenge what he sees as “barriers to young people getting on the housing ladder” including councils not being able to borrow to build affordable homes and a lack of private sector investment in new garden cities.
He also vowed to end the “stranglehold of oligarchs and speculators in our housing market,” with “fierce tax penalties on the acquisition of property for investment purposes, by overseas residents”.
Currently caps are placed on local authorities, limiting their ability to borrow money to build council houses. There is nothing to stop councils borrowing money to invest in commercial property (non-residential buildings) but there are restrictions when it comes to borrowing to build housing.
Councils can access low-interest loans through a government body, the Public Works Loan Board (PWLB) and have been highly acquisitive in recent months including Spelthorne Borough Council’s purchase of the WBC4 office building at Heathrow Airport from The Arora Group for £47.25m earlier this week.
Commenting on the proposals Brian Berry, chief executive of the FMB, said: “Mr Cable is absolutely correct in saying the Government must be bold if it is to solve the housing crisis. The private sector will continue to play the lead role in building our way out of the housing shortage and if SMEs are given the access to finance and access to land they need, these firms will deliver many more homes than they do currently. We’ve only ever built at the level we need to keep pace with demand when both the private and public house building sectors were simultaneously firing on all fronts. For example, in the 1960s, we were building around 400,000 homes per year and half of those were social housing.”
“Investment by local authorities in a new generation of social housing would deliver many more homes that the country needs urgently. This could also help aid the expansion of private sector output by providing more opportunities for SME builders. Local authorities are currently constrained in the amount they can borrow to invest in housing by an artificial cap. If this was changed and replaced with prudential borrowing rules, it could empower local authorities to take much fuller advantage of their borrowing power to supplement private sector supply and build thousands more new social homes. Put simply, if we are to build our way out of the housing crisis, private sector and local authorities alike must be allowed to build to their full potential.”
The comments follow Communities Secretary Sajid Javid’s announcement yesterday that the government will publish a green paper to review ‘what has gone wrong with social housing’ – including lessons to be learnt from the Grenfell Tower tragedy.