Almost half of councils say financial pressures on Housing Revenue Accounts will impact housebuilding: LGA

According to a survey sent to councils to assess their financial stability, the LGA found the number of councils who said they would need to draw on reserves has fallen to 46%, down from 72% last year.

Meanwhile, more respondents said they were “confident” of balancing their HRA budgets, with 71% saying so this year, compared to 61% in 2025/26.

The number who said they felt confident they would be able to maintain and repair existing housing stock also rose to 61%, compared to 52% in 2025/26.

However, despite the trend being positive, the LGA warned of “significant challenges” remaining for HRAs, which will impact housebuilding and cost to tenants.

According to the survey, under half (44%) of councils said that financial pressures on their HRA will impact the amount they can invest in building new homes, and nearly all councils said they planned to raise rents (99% down from 100%).

From the 2026/27 financial year, the Government is bringing in a 10-year social housing rent settlement of the consumer price index (CPI) plus 1 per cent.

The Government has also confirmed rent convergence will be implemented at £1 per week from the 2027/28 financial year, rising to £2 per week from 2028/29.

Commenting on this, the LGA warned that while the phasing of its implementation may impact the delivery of some new homes in the short term, measures such as Minimum Energy Efficiency Standard (MEES) and the Decent Homes Standard (DHS) will give councils “greater certainty and confidence” to invest in the long term.

Cllr Tom Hunt, Chair of the LGA’s Inclusive Growth Committee, said: “It’s good news that the outlook on social housing finance has improved for councils since last year. New measures like a 10-year rent settlement and rent convergence, that councils have long called for, are important steps forward but local government still faces significant challenges. 

“That nearly half say that pressures on their social housing budget will impact their ability to build more new homes is concerning.  

“For the Government to meet its ambition of 1.5 million homes, sufficient social housing supply is a key part of building the homes that our communities need. Supporting councils with the resources that they need to build, both financial and non-financial, will be crucial.”  

Lottie Winson