May’s latest policy announcement is actually a big deal this time

Theresa May’s big conference announcement came as something of a surprise.

First because we’d been quite clearly briefed not to expect any new housing policy. Our reporter at the conference discovered the bombshell announcement only when copies of the speech were distributed in the press room — which was sometime after the PM had danced her way to the lectern.

But second, on a less personal level, it can only come as a surprise to see a Conservative prime minister announcing a pro-council housing policy which comes with a kicker of increasing the national debt.

It is worth reflecting on how far the Tory housing policy line has had to move in just a few years to reach this point. It was only at conference 2015 that a triumphant David Cameron was boasting about his plans to force councils to sell off their highest value homes.

That policy has now been binned, along with his many other whacky, right-wing thinktank inspired ideas.

This though is a step beyond simply undoing her predecessor’s misguided legacy. It is something that ::whisper it:: could actually make a difference.

Before Margaret Thatcher came to power in 1979, councils built almost half of all the homes in the UK. This was achieved with massive, direct state funding, which ended with her government.

In the absence of direct cash, the answer is for councils to borrow. They have assets to borrow against (council homes) and an income stream to pay the debt back (council rents). The more they build, the more the asset base grows and the more income they get. So they can, theoretically, borrow quite a lot.

They should have started doing this after a landmark reform in 2012, started by Gordon Brown’s Labour government, which saw them allowed to keep the rents they collect instead of sending them off to the Treasury’s coffers. This gave them the power to raise their own loans. But in the climate of the time, the Coalition Government was more interested in keeping borrowing down than any other policy objective. So it capped their ability to borrow.

The plain economic logic of removing this cap has been long recognised by everyone from the Treasury Select Committee to Owen Jones. It is Liberal Democrat and Labour policy. The blockage has been the Tories and their innate fear of both council housing and government borrowing. Amid the howls that it has come six years too late, Theresa May deserves some credit for finally rising above this dogma.

True, it has not come totally out the blue. There have been tentative steps towards lifting the cap — most notably a £1bn offer of extra headroom in the last Budget — but it is a surprise and a welcome one.

There are some, obvious, caveats.

Councils haven’t built at scale for 30 years. They don’t employ development teams anymore. They will need time, and resource, to build this capacity back up. While their housing finances may be capable of taking on more debt, the other side of their business which pays for central admin is, to use the technical phrase, fucked. They may struggle to find the time and resource to build up a housing development department as a result.

The Right to Buy is also a massive problem. All the new homes which they build will be available to be sold at a discount a few years down the line. This will probably affect the appetite of councils to build and may have a complicated impact on loan security, limiting their capacity to borrow.

We also don’t yet officially know any of the details, like what tenure homes councils will be expected to build, whether there will be any back door limits on their borrowing (although that looks unlikely) and (crucially) when this will actually take effect.

It is also worth remembering the febrile nature of politics right now. There have been rumours that the Treasury hates the idea, and Boris Johnson was very rude about council housing in his conference speech yesterday. If May falls on the sword marked Brexit any time soon, she may well take this policy with her.

But for now, there are reasons to be cheerful. And that’s not something we’ve been able to say about housing policy for some time.