It certainly looks that way. It has been reported today on the Room151 website that James Brokenshire, the Secretary of State for the Ministry of Housing, Communities and Local Government that he shares, "the concerns of CIPFA and others about the risks that these local authorities are exposing themselves and taxpayers " over local authority commercial property investment and that his ministry is in consultation with the Treasury over how best to deal with the issue.
The speculation is that PWLB loan rates could be raised. The Government will need to take great care in how it acts. First, it is not clear how much this type of activity is propping up the real estate economy. Turning off the tap now could prove to be a self-fulfilling prophecy in causing a market downturn. Secondly, it could shut off a valuable future income source for local authorities potentially forcing the government into providing more direct revenue support, at a time when it is tying to reduce and/or redirect public expenditure into more politically popular areas.
One way for the government to act would be through the PWLB, which provides councils with cheap funding, including for their forays into commercial property. Lending for commercial property could be made more expensive, or restrictions could be placed on it.