The Housing Revenue Account (HRA) borrowing cap has been officially abolished in the Budget, allowing councils to build up to 10,000 homes a year.
The move, which was announced earlier this month by prime minister Theresa May, could enable councils to take on between £10-15bn in extra debt, according to Savills.
Jonathan Werran, chief executive of think tank Localis, told Transport Network that the move was good news for the sector, which has been 'concertedly fighting for many years to scrap the cap' and a 'great win' for the Local Government Association and its chairman, Lord Gary Porter.
He said: ‘Ultimately, if the Government wants to get to the levels Harold Macmillan achieved in the 1950s [as housing minister] with good quality housing where it’s needed and where people want to live, it needs to fully engage and empower local authorities. There needs to be a fundamental shift in the mindset of everyone, including the Treasury.'
Mr Werran said that while the abolition of the cap is not going to be of immediate benefit, it 'sets a good tone and could mean a dramatic shift trust in local authorities and in the nature of the relationship between national and local government'.
He added that the move was 'a strong endorsement' of local authorities in their placemaking role.
The chancellor also used his Budget speech to allocate an further £500m to the Housing Infrastructure Fund to 'unlock' 650,000 homes and outlined plans for the next wave of strategic partnerships with nine housing associations to help deliver an additional 13,000 homes.
Up to 500 neighbourhoods will also be ‘empowered’ to help local people buy homes at a discounted rate.