1. Governance
August 4, 2015

The easiest way to solve Britain's housing crisis? Let councils build homes again

By Paul Watson

The author is the Labour leader of Sunderland Council.

Currently, Britain doesn’t have enough homes. Britain is not building enough homes. Britain urgently needs more homes. Those are the facts about an issue that for many years slipped under the political radar.

Britain has a growing population that needs to be housed – but the planning system often slows development, and successive governments have not enabled the building of social housing as much as they once did. Private rents and house prices have risen rapidly, and the housing benefits bill has grown to £26bn.

The government has made a number of commitments on housing: introducing Help to Buy, extending the Right to Buy to housing association tenants, announcing plans to build 200,000 new starter homes to be sold to first-time buyers under 40. It’s also looking to force councils to give land with planning permission to people who want to build homes, and to open up public land for house-building.

There is a missing element in all this: our local authorities. We want to build. Many of my colleagues and I are desperate for the powers, authority and financial ability to answer the pressing needs of our constituents.

At present, the government imposes a cap on borrowing under a mechanism called the Housing Revenue Account. That means local authorities can only take on up to £29.8bn in debt to build more homes. In the 2013 Autumn Statement, chancellor George Osborne said this cap would rise, by £150m in 2015-16 and 2016-17.

This isn’t nearly enough. In November 2012, Let’s Get Building, a report by the National Federation of ALMOs and the Local Government Association, suggested that lifting the cap could unlock an extra £4.2bn in funding.

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I understand the concern about more debt in the public sector – but these aren’t bad, or risky, investments to make. We certainly have the people to fill up new homes for rent, and they’ll pay that rent. That gives local authorities a steady stream of income with which to pay back any loans.

And this is an investment in our people – it gives them a decent place to live so they access the jobs they need, and it gives their families a space to learn, be safe and grow.

The Key Cities group recently published a report with ResPublica, Power, People, and Places: A Manifesto for Devolution to Britain’s Key Cities. In it, we argued that Britain should employ tax increment financing to get access to further funding for developments – something for which our colleagues in the Core Cities Group have been leading advocates.

Such a move would allow us to borrow money on the basis that increased business rate revenues can pay for the original investment. If we can increase the amount of extra revenue which stays with local authorities, rather than returning to the Treasury in Whitehall, that will give councils an incentive to find answers to the housing crisis and develop constructive relationships with local businesses.

Moreover, the issue of housing benefit has returned to the political spotlight. A separate welfare cap for London is not good enough. The housing market is too complex for a “London-and-the-rest” policy. And rather than the Government struggling to create a centralised policy, local authorities should have the power to set their own levels of housing benefit.

That will allow us to adjust to the particular situation and sensitivities in each area without the crude approach of a Whitehall mandate. It will also give councils another reason to provide more affordable housing, to lower the benefits bill.

And we can do just that. Let’s Get Building found that for every £1 spent by the public sector on housing, 56p returns to the Exchequer, including 36p in tax and benefit savings.

So let’s do it. Let’s give councils the power to borrow to build more homes. Let’s embrace more creative financing methods. And let’s stop creating administrative headaches, political problems, and personal heartaches by setting housing policy nationally.

Give us the tools, and we’ll finish the job.

Cllr Paul Watson is leader of Sunderland City Council and chair of the Key Cities group of 26 mid-sized cities.

You can read more on this topic on the Key Cities’ blog here.

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