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<p>Under the Local Government Act 2003, local authorities have the freedom to borrow
and invest, without government consent, provided that their borrowing is affordable.
This is known as the Prudential Framework. Local authorities can borrow from the Public
Works Loan Board to fund the construction of social housing. However, this is only
where they have headroom to do so under the Housing Revenue Account borrowing caps
and provided that any such borrowing is prudential.</p><p>We have listened to local
authorities who asked for additional borrowing to build more housing. We recently
announced that we will raise the Housing Revenue Account borrowing cap by a total
of up to £1 billion in areas of high affordability pressure for local authorities
who are ready to start building new homes. Local authorities will be able to bid for
increases in their caps from 2019-20 to 2021/22.</p><p>This will complement measures
to support local authorities to build more homes through a longer term rent deal that
provides a stable investment environment to deliver new homes. This is alongside an
additional £2 billion to deliver more affordable housing for social rent in areas
of acute affordability pressure. This will help to deliver the new generation of council
house building which the Prime Minister announced recently.</p>
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