One of the constraints on local authorities financing new council housing has been the Housing Revenue Account (HRA) borrowing cap. In contrast, no such limit existed in connection with borrowing through their general fund. The Prime Minister's surprise announcement this week was aimed at encouraging local authorities to directly build more homes through their HRA. However, as one commentator observes, it may also have the unintended consequence of offering local authority housing companies a new market for affordable housing i.e. their parent and other local authorities. Rather than discouraging local authorities in creating local authority owned housing companies it may instead prove to be a major encouragement.
This is an opportunity for those housing companies looking to balance returns with the provision of social and affordable housing. “The HRA announcement creates a bigger market for them to sell the affordable housing to.