Over the last few weeks, we’ve heard a lot of bluster about housing targets and new homes revolutions, but simmering in the background is a policy change that threatens to derail the very regeneration and housing projects the politicians are trying to kickstart.
The 1% interest rate rise on council borrowing through the Public Works Loan Board (PWLB), from 0.8% to 1.8% above gilt yields, equates to a 125% increase and, according to the LGA, could see councils paying an extra £70m to borrow next year.
It is widely reported that the rationale behind the rate increase is to curb some of the more aggressive acquisitions of commercial real estate by some local authorities (LAs). The attractive borrowing rates that they enjoyed created a dislocation between their acquisition appetite and open-market transaction pricing, which threatened to leave LAs holding assets with a declining book value.
This year, LAs will have borrowed more than £12bn from the PWLB, up £3bn year on year. There is no available data detailing exactly what these loans have been for. However, we know from our work with LAs that a significant proportion of the money will have been earmarked for critical housing and regeneration schemes, not commercial assets. The levy is now putting these vital regeneration projects at risk.
At Hill, we know only too well how important LA support and investment is in delivering regeneration and new homes across the country.
Hill Investment Partnerships, our subsidiary company, partners with both local government and councils to successfully redevelop council-owned land and provide affordable, high-quality housing in new mixed-use communities. There are currently more than 3,000 new homes that we are delivering in partnership with councils.
The Rushmoor Development Partnership, established between Rushmoor Borough Council and Hill, is providing more than 1,000 new affordable and private homes, along with public amenities and commercial space, and transforming both Aldershot and Farnborough town centres.
We are also working with Cambridge City Council to develop more than 1,500 new, affordable and private homes, which all incorporate social value, community and commercial amenities at the heart of the schemes. Under the new borrowing criteria, large-scale schemes and partnerships such as these might not be possible.
Vital to economy
A number of senior council figures have called on the Treasury to reverse the rate rise on loans that specifically finance regeneration projects or housebuilding, as is the case with infrastructure. We in the private sector must stand and support them. After all, regeneration and housebuilding are just as vital to the UK economy as infrastructure.
At the time of writing this column, the outcome of the general election hangs in the balance, but whatever that outcome is, the economic climate is set to remain uncertain for much of next year. Housebuilding levels are still well below government targets and councils are playing a pivotal role in regenerating our communities and housing delivery.
The ambition to regenerate and grow our towns and cities should be commended by central government, not stifled. I profoundly hope that the new government prioritises the amendments to this levy, before it has time to permanently stymie the regeneration and housing schemes that are investing in and improving our local communities.
Greg Hill is deputy chief executive at Hill