Theresa May Lifts Housing Revenue Account (HRA) Borrowing Cap, But is it Enough?


Last week, Theresa May announced she is lifting the Housing Revenue Account (HRA) Borrowing Cap, which has been a constraint on local council’s ability to finance new build housing projects.

The Prime Minister has stated that the only way to fix the broken market is to create new homes for new buyers, but that isn’t the same view as a lot of the population, and the decision has ruffled some feathers.

Agitation from the decision comes through the idea that councils are not the reason there is a fundamental housing problem occurring across the country. Josh Ryan-Collins, a researcher at the University College of London’s Institute for Innovation and Public Purpose, published his research paper: Why Can’t you afford to buy a house? Which aims to shed some light on the current housing turmoil across the United Kingdom.

The basics of his argument lie in that the housing crisis, above all else, is a product of the banking system in society, meaning that rising house prices are simply out of reach for the average house income, which is putting people off the purchase of a new home.

Now that councils are once again able to borrow money in order to fuel new local builds, there is the idea that new wealth can come to an area and people are able to get onto the property ladder more easily. That being said, the alternative view is that councils being able to once again borrow money will in fact do little for the economy, and will not actually address any greater aspects of the housing crisis, instead this will simply add more debt to local areas, and more money into the banking systems.

Josh’s argument is that central banks should be guiding away from property and into more productive areas of the community to slowly build up wealth, rather than borrowing for a quick-fix build. An incentive system is not in place at the moment which could, and should, be implemented to see housing in the future be a more successful sector nationwide.

It is not just the UK who have been suffering from housing epidemics, as across the world a trend of struggling economy has begun to surface.

This problem has been as such since the post-war popularization of home ownership was introduced and put pressure on governments to reduce their property taxation. This in turn made it more attractive for banks to lend larger sums of money, such as in the form of a mortgage, which now has become a major part of banking business across the globe.

While it remains uncertain if Theresa May’s decision will be for better or worse, it does not look as if the housing crisis cannot be resolved by simply building more homes.



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