Commentary on Theresa May’s pledge to abolish the cap on councils borrowing against housing revenue accounts.
Today’s top story: Porter predicts half a million new homes by 2022 after cap scrapped
Today’s top question: Will all councils benefit? Questions raised over borrowing freedom
Today’s other top question: Richard Humphries: Is it time to be bold with the better care fund?
The government’s claim that housing is its greatest non-Brexit priority has hitherto had an air of implausibility about it, at least in relation to provision for those without the money to become owner occupiers.
It’s all been about creating a “Britain where generation rent can become generation own” – a line trotted out by housing and communities secretary James Brokenshire in his Conservative party conference speech as recently as Tuesday.
Of course, there was the social housing green paper, heralded a year ago by then communities secretary Sajid Javid as the “the most substantial report of its kid for a generation”. When it arrived in this summer, it was certainly far closer to being the most substantial damp squib of its kind for a generation. “A small step, compared with the huge and immediate need for more genuine affordable homes,” was how the Local Government Association described it.
It seemed the government, despite Theresa May’s previous warm words about the importance of council housing, was reverting to type. From Margaret Thatcher’s 1979 entry into Downing Street onwards, council housing has generally been regarded by national Conservative politicians as little more than a barrier to a property-owning democracy.
However, Theresa May’s announcement today that the cap is to be lifted on councils borrowing on their housing revenue account represents a dramatic sea change.
It has the potential to make councils major players once more in the construction of new housing.
Councils no longer have the might they once had on housing. In 1969-70, nearly 129,000 council houses were completed; last year it was just 1,550.
It is not that the demand isn’t there. The Thatcherite property-owning dream has waned somewhat as people on low incomes (and, in some regions, those on fairly high incomes too) have been priced out of the market.
Figures compiled by the Resolution Foundation show that the proportion of households in homes on a mortgage has fallen from a high of 33.7% in 2003 to 24.6% last year. Over the same period those who owned outright has increased by 2% to 27%, potentially due to baby boomers paying off their mortgages.
The proportion living in council homes fell from a high of 27.5% in 1981 to 7.2% last year.
The biggest growth has been in private rental accommodation, which has grown from 8.4% in 1987 (if you include both house shares and individual renters) to 18.4% last year.
Of course, it is the private rental market which is generally most expensive. People are having to pay an ever-greater proportion of their income on housing costs.
The Conservative party has slowly woken up to the death of the property-owning dream and its negative impact on the party’s electoral appeal. It was Mr Javid who last year attacked baby boomers for believing that millennials were spending “too much on nights out and smashed avocados” to get on the property ladder. Housing was too expensive was his simple point.
The party has realised that about “generation own” (it’s not a particularly catchy phrase, is it?), is something of a misnomer. Pragmatism means it also needs to offer hope for “generation rent”. And it is not just that there are too few homes to own but there are too few homes being built full stop.
In the quarter to June, new build housing starts fell by 4% on the year before to 39,000. The government is way off its goal of ensuring 300,000 homes are built each year.
Finally, it appears to have realised that councils can play a major role in providing provision. Lord Porter (Con) believes they can build 100,000 homes a year (a trifle optimistically, some may say).
While we await the small print, the lifting of the cap has huge potential: fairer rent for millions; work for builders and a rebalancing of local areas so groups of people currently finding housing costs too high can find affordable accommodation after all.
Theresa May’s announcement promises a radical new means of councils shaping their place to ensure no group is left behind.
However, there is little point in building new homes to meet local needs if they’re all sold off and, like countless council homes before, end up in the private rental sector.
This new power will be undermined by the retention of Right-to-Buy. But the axing of Mrs Thatcher’s most iconic policy may be beyond a prime minister currently at war with the right of her party.
Nick Golding, editor