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Labour’s modest plans for housing Matthew Warburton - 04/10/2012

money_jar_300At the Labour Party Conference this week, Shadow Chancellor Ed Balls announced a proposal to build an additional 100,000 affordable homes using the expected receipts from auction of the 4G network.

These would include 40,000 new social homes, 50,000 for shared ownership and the rest for "intermediate" rent, and would be on top of the 25,000 homes Labour has already proposed are funded from a tax on bank bonuses.

These are welcome proposals that would give a significant boost to the economy.  But they are modest compared with what could be delivered by allowing councils freedom to borrow up to prudential limits to build new homes.

In principle, the headroom already written into the self-financing settlement is enough to fund the construction of 25 - 30,000 new council homes - a large share of the number proposed by Labour. Relaxation of debt caps would in theory release enough borrowing power to finance around 200,000 homes at social rents, or 275,000 at affordable rents.

But these numbers are derived simply by plugging new assumptions into the CLG self-financing model; they take no account of the distribution of development land, other calls on housing investment and local council policies on new build.

That is why ARCH, in association with the LGA, Councils with ALMOs Group, NFA and HouseMark, is funding research to establish just how councils intend to use the resources released by self-financing, how many new homes they are planning to build, and how many more could be built is borrowing restrictions were relaxed.

A questionnaire has gone out this week to all councils which own housing, including those with ALMOs, asking for detailed business plan and related information, and this will be followed up with visits to a selection of authorities to get more in-depth information on key issues. A research report is expected to be published before the end of the year.

Any estimate of the number of new homes that councils could in practice deliver if debt caps were abolished is at this stage necessarily a guess. But it would not be surprising if it turns out that councils alone could deliver as many homes as Labour is proposing - but with no need to call on current or future tax revenues.

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