THE Chancellor of the Exchequer Philip Hammond could unlock a potential £320 billion windfall for the UK economy in his budget today — if he uses it to help town halls build far more council homes.
The Local Government Association (LGA), which represents councils in England and Wales, claims this economic shot in the arm would be delivered over the next 50 years, because the homes would continue to generate a return through rents, earning far more than their investment cost. It would also save a fortune when it comes to the nation’s annual housing benefit bill.
In its analysis released ahead of Hammond’s Budget today, the organisation has looked at four different future economic scenarios; each demonstrates how new social housing will deliver “huge gains” to tax payers. The worst-case economic scenario still results in a £102 billion return, it claims.
Investment in a new generation of council homes would also create significant wider economic gains such as increased productivity, jobs, and increased tax returns, as such a large proportion of construction revenues remain in the domestic economy.
Research for the LGA and partners by Capital Economics has found:
- Every £1 invested in a new social home generates £2.84 in the wider economy
- Every new social home would generate a saving of £780 per year in Housing Benefit.
- Every new social home would generate a fiscal surplus through rental income.
“The LGA had been in conversations with the Chancellor Philip Hammond, Housing Secretary James Brokenshire, and the housing team at No 10, to secure the lifting of the housing borrowing cap and it was great to finally get it over the line last month,” said Lord Gary Porter, chair of the LGA.
“There was rightly universal acclaim of the decision by Theresa May to lift the cap which has been severely hampering the ability of councils to play a leading role in tackling our chronic housing shortage – it is the right thing to do, and everybody knows it.
“The last time we built enough homes councils built 40% of them. We need to get back to those levels if we’re to tackle our housing crisis, which is why we need to look towards delivering a new generation of 100,000 high quality social homes a year.
“The gains are enormous. Investments in social housing could generate returns up to £320 billion over 50 years, helping countless families along the way by creating local jobs and building homes people need and can afford.”
The LGA is urging the Chancellor to fulfil that pledge and set out plans for the borrowing cap to be removed entirely as part of the Budget.
The LGA has also launched a report that showcases how councils are building new homes. It reveals councils’ focus on high standards, supporting local small builders, creating jobs and training for local people, and building on sites and for people that others are not.
“Councils have been quietly getting on with building some outstanding new homes, they now need to be free to deliver them at scale,” Lord Porter added. “This is because the future of council housing will deliver high quality and innovative design, support local builders, create local jobs and training, and build where the market will not. [Today], the Chancellor has a real opportunity to deliver a once-in-a-lifetime change that could benefit thousands of people across the country. We encourage him to take it.”