Lifting the council borrowing cap won’t address the biggest housing issue cities face. It’s time for land reform

Mmmm green belt. Image: Getty.

Prime Minister Theresa May danced her way onto stage to the disco sounds of ABBA last month – but the real mood music of Conservative Party Conference was house. Ending the housing shortage is a huge domestic priority for the government, and one of the things May, Boris Johnson and Jacob Rees-Mogg all agree on is that we need to build more homes.

The key policy the Prime Minister announced during her conference speech is that the government would relax restrictions on local government borrowing to build new council homes. However, while this might increase the rate of building and especially benefit those on low incomes, it doesn’t solve the key problem in our most high-demand cities – a shortage of land in the planning system that can be developed.

Getting councils building housing for rent is sometimes considered the silver bullet that will end the housing shortage. The Local Government Association itself makes the case that “the last time this country built homes at the scale that we need now was in the 1970s when councils built more than 40 per cent of them”. The Labour Party also pledged to abolish the same restrictions back in April as part of a plan to build 1m new council houses at social rents.

And, broadly, we should expect the removal of the borrowing cap to increase the amount of building by councils. There’s a key role for the public sector to play in providing good quality rented housing for those on low incomes, which would complement the recent private sector boom for those on medium-high incomes through Build to Rent housing.

But there is no guarantee that councils will use the new freedoms to build more homes.

The new policy assumes that all councils want to build more homes. And while a few councils in cities are keen on the idea of playing a much larger role in supplying homes, many others in and around high-demand cities are not. Different places have distinct politics and views, and simply giving local government the freedom to build more houses is no guarantee they actually will. The current existence and structure of Right to Buy also discourages councils from building – yet so far it remains untouched.

Moreover, it remains unclear how much freedom councils will have to borrow under the new proposals. The government expects councils will borrow up to £1bn a year and they will have to comply with the prudential code, but beyond that details are scarce. If councils borrow a lot more or less than expected, this will jumble up the sums that underpin the policy and force a rethink.


In particular, the abolition of the borrowing cap for housing comes at a point when concern is growing in Whitehall that councils are borrowing too much to invest in commercial property to create new revenue streams rather than foucsing on land assembly. One possible result of the new policy might therefore be a tightening of restrictions around borrowing for commercial purposes, in return for greater freedom for borrowing in residential property.

Nor will the new proposals address the fact that the UK’s central housing problem is a shortage of land for development in particular cities. In fact, they may actually push up land prices across cities.

If councils take on a much larger role in housing construction and also release much more land for development, then the additional building will dampen housing costs and make their cities more affordable to their residents. But if, hypothetically, no more land was released and the shortage of land continued as before, then adding councils as another developer will only push up prices for land as a whole.

Lower housing costs for families on low incomes – coupled with no change in the amount of land released for housing – would come at the cost of increasing housing costs for the rest of the city. This might be preferable to doing nothing, but it’s just not necessary, as we could make housing in high demand cities cheaper for everyone if enough land was released for development and used efficiently.

There are a number of technical changes that could make this happen, but for the keynote at Conservative conference the announcement has to be big enough to grab headlines, while also acknowledging it will take time for any reforms to filter through to the actual market.

A missed opportunity for green belt reform

Instead, what the Prime Minister should have done and do is announce a radical overhaul of the green belt. Grading green belt land by quality would protect the best countryside, while releasing ordinary scrubland and brownfield land for “button development” of dense housing around train stations would tackle a key cause of the housing shortage.

Doing it at one fell swoop would minimise political risk in a Conservative Party which is united on the need to build more homes, compared to the ongoing nibbling at the green belt which agitates local residents and councillors.

The government needs a radical domestic agenda to win the next general election – which could be four years or four months away, given the volatile nature of British politics. Housing will inevitably one of the key debates ahead of that election – the government needs to be bold in making essential reforms if it is to seize the initiative on this issue.

Anthony Breach is an economic analyst at the Centre for Cities, on whose blog this post first appeared.

 
 
 
 

“A story of incompetence, arrogance, privilege and power”: A brief history of the Garden Bridge

Ewwww. Image: Heatherwick.

Labour assembly member Tom Copley on a an ignominious history.

The publication last week of the final bill for Boris Johnson’s failed Garden Bridge has once again pushed this fiasco into the headlines.

As well as an eye-watering £43m bill for taxpayers for this Johnsonian indulgence, what has been revealed this week is astonishing profligacy by the arms-length vehicle established to deliver it: the Garden Bridge Trust. The line by line account of their spending reveals £161,000 spent on their website and £400,000 on a gala fundraising event, amongst many other eyebrow raising numbers. 

Bear in mind that back in 2012, Johnson promised that the bridge would be entirely privately funded. The bridge’s most ardent advocate, Joanna Lumley, called it a “tiara for the Thames” and “a gift for London”. Today, the project would seem the very opposite of a “gift”.

The London Assembly has been scrutinising this project since its inception, and I now chair a working group tasked with continuing our investigation. We are indebted to the work of local campaigners around Waterloo as well as Will Hurst of the Architects Journal, who has brought many of the scandals surrounding the project into the open, and who was the subject of an extraordinary public attack by Johnson for doing so.

Yet every revelation about this cursed project has thrown up more questions than it has answers, and it’s worth reminding ourselves just how shady and rotten the story of this project has been.

There was Johnson’s £10,000 taxpayer funded trip to San Francisco to drum up sponsorship for the Thomas Heatherwick garden bridge design, despite the fact that TfL had not at that point even tendered for a designer for the project.

The design contest itself was a sham, with one of the two other architects TfL begged to enter in an attempt to create the illusion of due process later saying they felt “used”. Heatherwick Studios was awarded the contract and made a total of £2.7m from taxpayers from the failed project.


Soon after the bridge’s engineering contract had been awarded to Arup, it was announced that TfL’s then managing director of planning, Richard de Cani, was departing TfL for a new job – at Arup. He continued to make key decisions relating to the project while working his notice period, a flagrant conflict of interest that wouldn’t have been allowed in the civil service. Arup received more than £13m of taxpayer cash from the failed project.

The tendering process attracted such concern that the then Transport Commissioner, Peter Hendy, ordered an internal audit of it. The resulting report was a whitewash, and a far more critical earlier draft was leaked to the London Assembly.

As concerns about the project grew, so did the interventions by the bridge’s powerful advocates to keep it on track. Boris Johnson signed a mayoral direction which watered down the conditions the Garden Bridge Trust had to meet in order to gain access to further public money, exposing taxpayers to further risk. When he was hauled in front of the London Assembly to explain this decision, after blustering for while he finally told me that he couldn’t remember.

David Cameron overruled the advice of senior civil servants in order to extend the project’s government credit line. And George Osborne was at one point even more keen on the Garden Bridge than Johnson himself. The then chancellor was criticised by the National Audit Office for bypassing usual channels in order to commit funding to it. Strangely, none of the project’s travails have made it onto the pages of the London Evening Standard, a paper he now edits. Nor did they under his predecessor Sarah Sands, now editor of the Today Programme, another firm advocate for the Garden Bridge.

By 2016 the project appeared to be in real trouble. Yet the Garden Bridge Trust ploughed ahead in the face of mounting risks. In February 2016, despite having not secured the land on the south bank to actually build the bridge on, nor satisfied all their planning consents, the Trust signed an engineering contract. That decision alone has cost the taxpayer £21m.

Minutes of the Trust’s board meetings that I secured from TfL (after much wailing and gnashing of teeth from the Trust itself) reveal that weeks beforehand Thomas Heatherwick had urged the trustees to sign the contract in order to demonstrate “momentum”.

Meanwhile TfL, which was represented at board meetings by Richard de Cani and so should’ve been well aware of the mounting risks to the project, astonishingly failed to act in interests of taxpayers by shutting the project down.

Indeed, TfL allowed further public money to be released for the project despite the Trust not having satisfied at least two of the six conditions that had been set by TfL in order to protect the public purse. The decision to approve funding was personally approved by Transport Commissioner Mike Brown, who has never provided an adequate explanation for his decision.

The story of the Garden Bridge project is one of incompetence, arrogance and recklessness, but also of privilege and power. This was “the great and the good” trying to rig the system to force upon London a plaything for themselves wrapped up as a gift.

The London Assembly is determined to hold those responsible to account, and we will particularly focus on TfL’s role in this mess. However, this is not just a London issue, but a national scandal. There is a growing case for a Parliamentary inquiry into the project, and I would urge the Public Accounts Committee to launch an investigation. 

The Garden Bridge may seem like small beer compared to Brexit. But there is a common thread: Boris Johnson. It should appal and outrage us that this man is still being talked about as a potential future Prime Minister. His most expensive vanity project, now dead in the water, perhaps serves as an unwelcome prophecy for what may be to come should he ever enter Number 10.

Tom Copley is a Labour member of the London Assembly.