The borrowing cap on the Local Authority Housing Revenue Account should be removed to boost the delivery of housing supply.
This is according to the unanimously agreed report published by the Treasury Committee on last year’s Autumn Budget.
The report suggests that even after the borrowing cap was raised by £1 billion in areas of high affordability, private housebuilders have continued to provide 150,000 properties on an annual basis. It concludes, therefore, that without a significant increase in supply by local authorities, the target of 300,000 is unlikely to be met.
The report goes on to highlight the potential negative impact of the stamp-duty cut for certain first-time buyers. Whilst Chancellor Philip Hammond announced the abolition of the tax for those buying their first home of up to £300,000, the Office for Budget Responsibility predicts that, over the forecast period, just 3,500 extra first time buyers will be able to afford a home as a result of the change. This is at a cost of £3 billion. The report also highlighted that whilst the absence of stamp duty will benefit some prospective first-time buyers, the policy change is likely to increase prices by as much, if not more than the amount saved.
Commenting on the report was the Rt Hon, Nicky Morgan. The MP and Chair of the Treasury Committee stated: “The Chancellor pledged to ‘fix the broken housing market’, but the Government is going to find it very difficult to meet this ambition. The increase in the cap on borrowing for local authorities to build homes is a step in the right direction, but it doesn’t go far enough.
“The borrowing cap restricts the number of homes that local authorities could deliver. To achieve the Government target of 300,000 new homes per year, the cap should be abolished. The potential of local authorities to build should be unleashed.
“The Government’s commitment to increase public investment is welcome, but a revival in productivity also requires action from the private sector. The OBR expects a fall in private sector investment due to Brexit-related uncertainty. An agreement between the UK and the EU27 on a ‘standstill’ transitional arrangements is therefore urgent.”
