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Councils should approach the lift of the Borrowing Cap with caution

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by Claire Harrison | 15 February 2019

Why housing professionals should approach the lift of the Borrowing Cap with caution

Albeit a hugely positive step forward, the lifting of the housing borrowing cap could be challenging for housing and property services sector. Claire Harrison, Senior Manager of our Housing & Property Services recruitment division spoke to some of her housing clients to get their thoughts, and offers her recommendations on how to navigate this major change in legislation.

At last year’s conference, Theresa May announced an “end to austerity” and revealed plans to remove the HRA Borrowing Cap that has plagued councils across the UK for years. The Borrowing Cap , which had been in place since 2012 was a cap on the amount of money councils and housing associations could borrow against their housing assets to fund new developments. The cap has resulted in a pause in affordable housing being built across the country, greatly adding to the countless problems we have surrounding homelessness and the overall housing crisis we are currently witnessing.

In a move that has been largely welcomed by our clients in the housing & property services sector , May said that “solving the housing crisis is the biggest domestic policy challenge of our generation” and that “It doesn’t make sense to stop councils from playing their part in solving it”. This is a bold move from the Prime Minister, and a decision that some housing associations have been waiting on for years.

Increased pressure on the housing & property services jobs market

This push to create new homes as a result of the Borrowing Cap being lifted is a positive step forward, and it will hopefully go some way in solving the crisis we are in across the UK. I would however urge councils taking advantage of it to proceed with a little bit of caution. An increase in homes being built will mean a spike in demand for housing professionals and various skilled contractors that are already in short supply. This need could in turn push salaries up, making it even more expensive for homes to be built.

To alleviate this risk, housing leaders should consider their needs in advance and explore the housing jobs market to find out what talent is available, and make decisions based on the availability and cost of candidates in the market. This caution is evidently being taken by some of the organisations we are working with who are still to decide whether or not to make use of this new funding. Councils need to remember that whatever money they borrow will need to be paid back, and if prices are pushed up with the demand for skilled workers I fear that many may end up in a tricky situation. It is therefore important for councils to take stock, look at the market and make an informed decision on whether it is the right time for them to take on any new projects.

A much needed push on building new homes is inevitable

It is inevitable that the next few years are going to be the most intense, with councils that have been desperate for the Borrowing Cap to be lifted starting work straight away, and I am delighted that they can do so to relieve some of the strain we are seeing across the country. It could having a hugely positive impact on the housing jobs market, introducing new opportunities and giving experienced professionals more choice, however it could also have the opposite effect.

The government is anticipating that councils will borrow up to £1bn in the next 12-18 months, but I would not be surprised if this figure rises. If councils do borrow a lot more (or less) than expected, this could have an impact on the calculations that underpin the policy and force a rethink, which could cause much greater problems long-term. I would advise councils that do not have a need to borrow to wait for the market to settle. I believe this could save councils racking up huge amounts of debt, and ensure that the lifting of the Borrowing Cap have the desired impact on the housing & property services sector across the UK.  

Whatever the outcome, ensuring you are prepared and have the skilled housing candidates to navigate change is essential. At Sellick Partnership we are experienced in finding housing candidates with the right skills needed to deliver key projects, and I would be happy to discuss  your requirements. You can email me directly at claire.harrison@sellickpartnership.co.uk or call 01332 542580.