The latest housing measure by the government will see the housing revenue account borrowing cap for council house building lifted.
The government hopes that this measure will give councils the tools they need to deliver a new generation of council housing – up to an estimated 10,000 additional homes a year.
Councils in areas of high affordability pressure have already been invited to bid for a share of the £1bn of extra borrowing to build homes.
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In a statement, the Ministry of Housing, Communities and Local Government said: “Today’s move recognises that councils see the borrowing cap as the greatest barrier to building new homes.
“The interest in bidding for a share of the £1bn borrowing increase also showed that they are ready and willing to deliver the homes their communities need.
“Removing the borrowing cap entirely is also likely to diversify the housebuilding market, with councils being better able to take on projects and sites that private developers would consider too small.”
The cap will be lifted as soon as possible, with further details confirmed in the Budget.