Be careful what you wish for? Will lifting the housing cap be enough to get Britain building?

November 01, 2018

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by Mike Suarez Associate Director

Email +44 (0)7843 371928

The old adage “be careful what you wish for” might, on this occasion, be set aside for what is a surprising yet momentous announcement that the housing revenue account cap is to be lifted.  Local authorities, house builders, third sector leaders and housing associations have been calling for this change for many years, but will it be enough to address the UK housing challenge?

Local authorities are uniquely positioned to play a leading role in shaping their places. As long-term stakeholders in their communities, local authorities can take a holistic approach to housing and development, creating collaborative partnerships, acting as custodians of quality and ensuring that sustainable and innovative housing building solutions are in line with local and neighbourhood plans. The lifting of the cap could be transformative for wider regeneration, with housing supply able to match the potential that major regional and transport infrastructure is creating.

Councils will therefore welcome the lifting of the cap, and the recognition by Government of the important contribution they can make to house building, but they will also be feeling the pressure that the onus appears to be back with them to commission delivery.

As the policy details are confirmed, Homes England, along with housing associations will want to seek out willing local authorities to work with. Those areas which have the financial means and will to address their housing supply challenges will want to seize the opportunity. Local authorities with retained housing revenue accounts will be hoping that there will be no limiting requirement to what is a tried and tested and well performing prudential financial code for borrowing. For others, discussions will focus on which existing partners can help access financing and deliver a house building programme, including consideration on special purpose vehicles.  Regional partnerships and combined authorities should be assessing the opportunities this announcement brings and explore further regional arrangements.

However, many local authorities face capacity challenges that may hold back house building on the scale needed, at least in the short term.  The long term decline in local authority house building over the last 50 years or so together with a decade of austerity has left many councils without the capacity they need to get building quickly.  In a similar way to the choices that housing associations face, councils need to decide whether they will build housing directly, work with arms length bodies or focus on creating strategic partnerships. HRA reform also does not address wider challenges such as the productivity and skills challenges facing the construction industry.

So while it may not be a question of being careful what you wish for, HRA reform is more likely to be a step in the right direction rather than the silver bullet that gets Britain building. Councils should nevertheless seize the opportunity it offers to review their house building plans and as they always do at the local and regional level, step in to play their part in addressing the UK’s housing challenge.

by Mike Suarez Associate Director

Email +44 (0)7843 371928