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The government has been warned that its surprise interest rate rise on cheap Treasury loans will thwart plans to develop new social housing.
According to the Local Government Association (LGA), the move “presents a real risk that capital schemes, including vital council house building projects, will cease to be affordable and may have to be cancelled as a result”.
Sharon Taylor, Stevenage council leader, said: “It’s another big blow for local government finance. The need nationally is for good quality, affordable housing. My view is only councils can deliver that. Why would you want to slow that down in the middle of a housing crisis?”
She added that Stevenage’s scheme to build 500 social rent homes had been “trashed” by the move.
According to the LGA’s estimates, the rise will add around £70 million in costs for all new loans to England’s local authorities.
Defending the decision, a Treasury spokesperson said: “This one percentage point increase takes rates back to levels that were available in 2018. Even with this change, the PWLB rates offer very good value to local authorities.
“We have also legislated to increase the lending limit of the PWLB to £95bn, as part of the government’s commitment that local authorities can access financing to support their capital spending plans.”