London Mayor Boris
Johnson has called for council borrowing for housing to be removed
from the public sector balance sheet. His 2020 Vision for
London, "The Greatest City on Earth", published this week,
argues for removing the caps on local authority borrowing so that
councils can build more affordable homes.
"Since the public sector clearly gains a bankable asset", it says,
"there is no need for this to appear on the books as public
borrowing". This, in a nutshell, is precisely the argument made in
"Let's Get Building", published last
November by the National Federation of ALMOs with support from
The London Vision describes the shortage of housing as "the
gravest crisis the city faces". A continuing shortage, it points
out, has led the house price-earnings ratio to double in the last
15 years, denying access to home ownership to many thousands and
adding to the upward pressure on market rents.
Tellingly, it cites the CBI London Business
Survey finding that 70% of businesses report that the cost of
housing is a major barrier to their growth, an economic
inefficiency estimated as likely to cost London £15 to £35 billion
over the next decade. This adds an extra leg to the already strong
argument for more housebuilding to boost the economy.
Not only will additional jobs be created as spending on new
housing construction ripples out through the local economy, but
local businesses will also feel the benefit from being more able to
attract and retain the staff they need, still more so if fewer of
them need to travel in to work from long distances.
As a senior Conservative, the London Mayor is a powerful advocate,
a welcome addition to the voices already calling for reform of the
rules on council borrowing. He presents a powerful argument. We
will find out on 26 June whether the Government is listening.