"To achieve the Government target of 300,000 new homes per year, the cap should be abolished. The potential of local authorities to build should be unleashed."
The Committee says local authorities are limited in how much they can build through the cap on borrowing. In Autumn Budget 2017, the Government raised the borrowing cap for councils in areas of high affordability by £1 billion to help achieve its target of 300,000 new homes per year.
In its report, the Committee says private housebuilders have consistently provided 150,000 units per year, so the target of 300,000 new homes per year "is unlikely to be met without a significant increase in supply by local authorities".
The report also found that the recent reduction in Stamp Duty is likely to increase prices for first-time buyers by "as much, if not more, than the amount they will save as a result of the reduction in Stamp Duty".
The Office for Budget Responsibility forecast that there will be just 3,500 additional first-time buyers as a result of the policy change, at a cost of £3 billion.
Robert Chote, Chairman of the OBR, also acknowledged that the consequences of Brexit on economic growth are "likely to be so substantial as to dwarf the impact of any one-off ‘divorce bill’".
To ensure Parliament is fully informed about these economic and fiscal impacts, the OBR plans to publish a ‘special forecast’ before the introduction of the Withdrawal Agreement and Implementation Bill.
Nicky Morgan MP, Chair of the Treasury Committee, said: “The Chancellor pledged to ‘fix the broken housing market’, but the Government is going to find it very difficult to meet this ambition. The increase in the cap on borrowing for local authorities to build homes is a step in the right direction, but it doesn’t go far enough.
“The borrowing cap restricts the number of homes that local authorities could deliver. To achieve the Government target of 300,000 new homes per year, the cap should be abolished. The potential of local authorities to build should be unleashed.
“The Government’s commitment to increase public investment is welcome, but a revival in productivity also requires action from the private sector. The OBR expects a fall in private sector investment due to Brexit-related uncertainty. An agreement between the UK and the EU27 on a ‘standstill’ transitional arrangements is therefore urgent.”
