The influential Treasury select committee has unanimously agreed a report which favours scrapping a borrowing cap to help the government meet its target of building 300,000 new homes a year.
MPs have said local authorities’ potential to build homes should be “unleashed” by government.
The Local Authority Housing Revenue Account borrowing cap limits the amount councils can spend on housing.
The cap was raised to £1bn for councils in areas of high affordability in the Autumn Budget, but the Treasury Committee said more should be done.
Rt Hon Nicky Morgan MP, chair of the Treasury Committee, said: “The chancellor pledged to ‘fix the broken housing market’ but the government is going to find it very difficult to meet this ambition. The increase in the cap on borrowing is a step in the right direction, but it doesn’t go far enough.”
While private housebuilders typically provide 150,000 new homes a year, the cross-party group warned the 300,000 target is unlikely to be met unless there was a significant increase in supply by local authorities.
The Treasury committee warned that the move to cut stamp duty for first-time buyers was likely to see house prices rise, making the need for more houses even greater.
The Budget proposed measures to increase the levels of financial support for housing, introduce planning to increase the availability of land and provide funding for training a workforce to build new homes.
But the Committee’s report warned the measures announced were “unlikely to be sufficient”.
Ms Morgan, MP for Loughborough, added: “The borrowing cap restricts the number of homes local authorities could deliver. To achieve the target of 300,000 new homes per year, the cap should be abolished. The potential of local authorities to build should be unleashed.”