Treasury reveals it has increased rate at which authorities can borrow money

council housing

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Councils have pledged to replace obsolete 1960s and 70s blocks with new homes

Council housebuilding projects may have to be cancelled following a government announcement that it is increasing the interest rate at which councils can borrow to fund their schemes.

The Treasury wrote to council finance chiefs last week to say that the rate of interest charged for money raised under the Public Works Loan Board (PWLB) was going up to 1% above the government’s cost of borrowing.

The Local Government Association responded with a statement saying the news could add £70m a year to the cost of local authority borrowing, and put authorities’ nascent council housebuilding programmes, funded with PWLB money, at risk.

A spokesperson for the Local Government Association said the cost hike “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”.

A number of councils have announced plans to expand housebuilding programmes following former prime minister Theresa May’s decision to scrap the cap on local authority borrowing.

Last week, a £14m council housing project called Gildsmith Street won this year’s Stirling prize. Main contractor on the Norwich job was local firm RG Carter.