Will The Removal of the Funding Cap for Councils Work?

In the wake of a £2bn housing association investment, the Prime Minister, Theresa May, has announced that she will also scrap the funding cap on social housing. It is May’s hope that the removal of the funding cap will allow councils to keep up with the rising demand for social housing.

In theory, the removal of the funding cap should better equip councils to build and maintain affordable homes for those who most need them, but could it be more complicated than this? Is removing the funding cap all that’s needed to solve the UK housing crisis?

The funding cap explained

The borrowing cap was previously imposed due to Government concerns about spiralling council debt. Prior to the removal of the funding cap, there existed a cap on how much local authorities could borrow against their HRA (Housing Revenue Account) assets to fund new housing developments.

Since solving the housing crisis is, in Theresa May’s own words, “the biggest domestic policy challenge of our generation”, the cap has now been removed to allow councils to address the widespread issue of unaffordable housing.

Response to the removal of the funding cap

The response to the Government’s removal of the HRA funding cap has been largely positive. However, solving the housing crisis is not as simple as just investing more money into councils. There are still important questions to be answered.

For example, the HRA is a ring-fenced budget that takes income from rents and service charges – how will this money (that is imperative for the building and maintenance of homes) be replenished? Will councils still be able to borrow money from the Public Work Loan Board for additional ‘self-financing’, or will this be limited by a strict cap? And what about the councils who have already borrowed the full extent of their HRA headroom? Also, what about the council debt?

The future of social housing: what’s in store?

The removal of the council funding cap is a giant leap in the right direction, even if it doesn’t solve all the issues surrounding social housing. Hopefully, it is the start of widespread recognition of the desperate need for more affordable homes in England, however.

Here at metroSTOR, we are passionate about social housing being accessible for everyone who needs it. We continue to help councils build safe and affordable homes with secure bin storage so that their residents have neighbourhoods they can take pride in. For more information, view our products or contact us on 08450 750760.