Blog Post

London boroughs’ appetite for building grows

The past month has seen a series of game-changing announcements for councils who want to build more homes.

First, the Prime Minster announced that she would lift the borrowing cap for local authorities at the Conservative party conference in September. This, as we’ve previously argued, has the potential to spark a housebuilding revival by allowing councils to borrow to fund new developments. And indeed, evidence suggests relaxing borrowing is already having an impact: since her speech, 60 local authorities up and down the country – including council leaders in London – have pledged to build more homes.

This has been followed by more positive news: yesterday the Mayor announced a £1 billion grant from government will be allocated to 27 councils, to build 11,154 new council homes, and a further 3,570 homes (including for London Living Rent) over the next four years. This also suggests that appetite for building homes directly is growing among councils. Indeed, boroughs who have received grants would have bid for the Mayor’s council housebuilding programme in late September – before the Prime Minister’s announcement on lifting the borrowing cap.

While these announcements could create a step change, in reality many councils may find that they lack the internal capacity required to make the most of these opportunities. That’s because since 2010, the capacity of planning and housing departments in London has seriously declined. Council budgets for planning and development fell by 50 per cent in London between 2010-11 and 2016-17, the biggest drop in council service spending, while housing services budgets have decreased by 29 per cent over the same period. This has held back delivery and intensified demand for affordable housing. The Mayor and the Greater London Authority have recognised this hurdle; showing commitment to the Public Practice scheme.

But thankfully, London councils have also had some more good news this month. This month, the Mayor announced a new £10 million Homebuilding Capacity Fund to increase capacity in boroughs’ housing and planning teams. This news is not only welcome but a condition sine qua non to help boost councils roles in building new homes in the capital. The fund provides up to  £750,000 per local authority which includes hiring new staff, from planners to architects, to lead council homebuilding projects and develop new masterplans.

Not only do these announcements and injections of funding support councils to build more council homes, as well as more affordable homes but they also enable local authorities to play a bigger role in shaping the development of their local areas. This includes developing proactive masterplans in areas with significant growth potential and delivering optimal residential density and homes on small sites, in line with the objectives of the Draft New London Plan – something which has been a challenge for planning departments facing cuts.

London still faces severe housing pressures, and as local authority housing stock has decreased over recent years, councils still need far more funding and powers to meet demand. Nonetheless, the past month has seen several positive announcements for council housing delivery. The Homebuilding Capacity Fund in particular has been a positive example of the Mayor using funds from the Business Rates Retention Pilot, (which means the capital retains 100 per cent of any increase in business rate receipts above the government’s baseline during the financial year 2018/2019) – to spend more money on boosting capacity for local authorities to deliver new homes for Londoners.

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Victoria Pinoncely is Research Manager at Centre for London. Follow her on Twitter.