24 July 2018
Sheffield City Council has been told that it won’t be eligible to borrow more money to provide much needed social housing in Sheffield.
Local authorities have had freedom and flexibility to develop new homes within their Housing Revenue Account since 2012. At the same time, limits were placed on the amount of ‘headroom’ (extra financial borrowing) that each local authority could use to spend on housing. The Government introduced these limits to control public sector borrowing in the context of tackling the financial deficit.
Local authorities collectively had £3.5 billion borrowing headroom in 2016/17, but this was not spread evenly. Some local authorities, with little or no borrowing headroom, have found it difficult to finance the building of new council housing or to replace homes sold under the Right to Buy scheme.
The Government recently announced a £1 billion scheme to allow Council’s in England and Wales to increase the amount of borrowing they undertake to fund new Council housing schemes. The bidding prospectus says that local authorities in areas of high affordability pressure will be able to bid for additional borrowing to build social rented housing, affordable rented housing, sheltered housing or supported housing. High affordability pressure areas are defined as those ‘where there is a difference of £50, or more, per week between average social and private rents at the local authority level’.
Sheffield City Council put in a bid for a share of the funding and invested a considerable amount of time working with the Ministry of Housing, Communities and Local Government (MCHLG) to open up opportunities for the council to borrow money to build more homes in the city. However Sheffield has not been included on this list of eligible bidders.
Councillor Jim Steinke, Cabinet Member for Neighbourhoods and Community Safety said: “We are very disappointed that Sheffield is not included on the list of eligible bidders for this additional borrowing for more social housing. It appears that the MHCLG have used figures from 2016 to work out the affordability gap in Sheffield and the calculation for social rent includes not only council rents but also that of registered providers which distorts the calculation. Our figures show that private sector rents have increased by 5% on average over the last 12 months, with a significant 16% increase seen in the past 3 months. The use of data from 2016 simply does not reflect the fast moving housing markets that we are all trying to address.
“We have already committed to providing 1,500 more Council homes in the City by 2023/24. However by being able to borrow extra money, we could have provided even more much needed council homes for the people of Sheffield.
“We will be talking to the MHCLG about the next steps open to us to challenge their calculations and for the people of Sheffield to benefit from an increase in social house building in the city.”
Sheffield City Council, along with Stoke-on-Trent City Council and Newark and Sherwood Homes were the three landlords most heavily involved in the discussions but none of them were included in the list of eligible bidders.