Current government incentives are insufficient to
stimulate more new house building, claimed two leading property
firms this week. Jones, Lang, LaSalle predicted a fall in the
number of new homes built in Britain this year. Their survey of 100
major land buyers revealed little confidence that planning reform
would have a significant impact, citing finance as the key
Estate Agency Knight, Frank, similarly, concluded that government
incentives are likely to have little impact on house numbers. Both
called for more radical action from government and, indeed, there
has been widespread speculation that the government is considering
a significant new stimulus to get development moving again.
Radical action is certainly needed to tackle the chronic housing
shortage and ensure a greater supply of new homes for sale and
rent, including social rented housing. Local authorities have a
central role to play, both as strategic enablers and commissioners
of new development, and because the homes they own are an asset too
important to ignore in any plans to increase housing supply.
Self-financing opens the door for councils to build again. But, in
some areas at least, its full potential is blocked by council debt
ceilings. So, if the government is persuaded that action is needed
to increase housing supply, why not remove them, and leave councils
free to borrow up to prudential limits?
This would have much the same effect as the proposal recently
advanced by the House of Commons
CLG Committee that borrowing for housing should be taken "off
balance sheet" in the public accounts, in line with practice in
other European states.
So why not? The case for changing the public accounts is that
housing should be treated as a trading activity and public
borrowing for housing as investment in an asset that will bring a
return over a number of years, and can, in principle, be
The argument against is that this return - in the case of social
housing - will always include a substantial call on future taxation
in the form of housing benefit or, in future, Universal Credit.
Yet, in this, council housing is no different from that provided by
housing associations or, for that matter, private landlords.
No matter who builds new homes for rent, low-income households
will need help with their rent to pay. But - as current plans for
welfare reform demonstrate - governments present and future have
the power to decide just how much help will be provided.
So, if the government is persuaded that the economic benefits from
a new stimulus to boost housing construction, coupled with the
social benefits from housing those in need, outweigh the impact on
future benefits costs, there is no logic in excluding councils from
fully contributing. But first, the argument for boosting house
building must be won.
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