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Councils call for power to borrow and build homes

By agency reporter
September 29, 2017

New analysis from the Local Government Association (LGA) reveals that in 2000 the average house price was 3.96 times the average income, whereas last year a house was worth 7.72 times the average wage packet.

As part of its Budget submission, the LGA is calling for an urgent investment in house-building and infrastructure, to deliver the genuinely affordable homes the country needs. Councils approve nine in 10 planning applications, and are throwing all they have at the housing shortage, but restrictions on their ability to borrow to invest in new housing are holding them back, and the LGA is calling for these to be lifted.

The last time the country built the amount of homes a year it needs, in the 1970s, 40 per cent of new homes were built by local authorities. Last year, councils lost more homes through the Right to Buy scheme than were started in the last five years.

In addition to being able to borrow to build, councils are calling to keep 100 per cent of their receipts from Right to Buy. Currently councils keep a third of replacement costs, with a portion of the other proceeds going to the Treasury.

Predictably, the most expensive region of the country to buy a house is London, where the average house is almost 12 times the average salary. In the South East, the average house is nearly 10 times the average wage packet, and it’s almost nine times the average wage to buy a house in the East of England and the South West.

The North East is the region with the closest gap between house prices and wages, but homes are still more than five times the average income – a formidable challenge to any individual or couple looking to realise their dream of a home of their own. With every region of the country costing at least five times the average salary, house prices are spiralling out of reach for people across the country.

With house prices rising by nearly a fifth in the last decade, according to government figures, many people are caught between the instability and expense of renting, and trying to climb onto a property ladder where, in the cheapest region in the country, a 20 per cent deposit may well be their total earnings for an entire year.

As a result, the LGA is calling for a renaissance in council housebuilding, which can only happen if local authorities can retain 100 per cent of receipts from sales under Right to Buy, and if they are able to borrow to invest in housing once more, to help provide the genuinely affordable homes that the country desperately needs.

Cllr Martin Tett, the LGA’s Housing spokesman, said, “When house prices are almost eight times the average income, it’s clear that we have a serious shortage of affordable homes, which is shattering the dream of home-ownership for too many people.

“Councils are doing all they can to encourage housebuilding, by approving nine in 10 planning applications, but the fact is we’re hamstrung by restrictions on our ability to borrow to build. These must be lifted, so we can invest in the new homes our communities need.

“We also need to be able to keep 100 per cent of the receipts from homes we sell off under Right to Buy. Every penny is needed if we’re to trigger that renaissance in council house building that we need to help deliver genuinely affordable homes for our communities.

“Families around the country desperately need more affordable homes and more routes into home-ownership. A model of Right to Buy that actually allows councils to build more homes would vastly increase the opportunities for these families, without it the scheme will grind to a halt.”

* Local Government Association https://www.local.gov.uk/

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