Councils demand Government action on housing finances amid claims budgets are being pushed “to the brink”

The future of council housing finances is at risk with rising costs and mounting pressures pushing budgets to their limits, the Local Government Association has claimed.

The call comes after publication of a report by Savills - commissioned by the LGA, the National Federation of ALMOs and the Association of Retained Council Housing - on the viability of Housing Revenue Accounts (HRAs).

This suggested that as a result of a combination of different pressures, councils will face an “impossible choice” between HRAs going into deficit or failure to meet statutory repair obligations, including the proposed Awaab’s Law.

Councils will also be unable to finance the building of new affordable homes, it is claimed.

The Savills analysis suggests HRAs are “buckling” under:

• The impact of rent cuts from 2016-2020 and the rent cap in 2023 resulting in much lower levels of anticipated income than had been promised by the then Government.
• The increase in the amount of capital investment needed for existing council housing. “This includes for maintaining and repairing existing homes to bring them into line with current and proposed future requirements, for instance building and fire safety requirements, a new Decent Homes Standard, as well as minimum energy efficiency and net zero carbon requirements. In 2012 this was estimated as £64.2 billion over 30 years; it’s now up to £96.1 billion – a difference of £31.9 billion that local authorities need to find.”
• Day to day repairs costs that are "spiralling well above the rate of CPI inflation", as demand increases in the light of Awaab’s Law and the need to address problems with damp and mould, and cost increases due to labour and supply chain shortages.
• Pressures arising from enhanced regulation and proposed requirements for professional qualifications for housing staff.

The LGA claimed that even if councils could increase rents back to what they would have been without the 2023 rent cap, additional finances would still be required into HRAs “to keep them afloat in the short term”.

Ahead of the Budget, the LGA has called for:

• Restoration of lost revenue due to Government mandated below inflation rent increases, and a clear path to bring rents to the formulae the government itself has set.
• An urgent review and revision of the current self-financing council housing regime which has been in place since 2012, “to ensure it can deliver both current and future requirements for council housing”.
• A long-term rent deal for council landlords to allow a longer period of annual rent increases for a minimum period of at least 10 years. “This should include flexibility for councils to address the historic anomalies in their rents as a result of the ending of the rent convergence policy in 2015.”
• New burdens funding to cover additional requirements falling on councils – “including the decarbonisation of homes, professionalisation, enhanced regulation and minimum energy efficiency standards”.
• Increased Affordable Homes Programme (AHP) grant levels to help councils build desperately needed new, high quality affordable homes.

Cllr Adam Hug, the LGA’s housing spokesperson, said: “This is the most precarious position that council housing has been in for over a decade, and urgent action is needed to ensure that local government can keep up with its obligations around providing decent quality council housing. 

“We need to strengthen and provide stability to Housing Revenue Accounts by agreeing a long-term rent settlement, restoring lost revenue due to the rent cap and reviewing the self-financing settlement of 2012. This would provide councils certainty on rental income and support long-term business planning to ensure they can deliver high quality homes and associated support for their tenants. However, it is important that to ensure there is further government investment to help respond to priorities - from retrofit to building new council homes - to avoid, all the pressure falling on the HRA and the residents whose rents and services charges fund them.”

Cllr Aydin Dikerdem, Chair of Association of Retained Council Housing said: "Councils are, rightly, expected to ensure that all their tenants' homes meet at least the basic requirements of the Decent Homes Standard, and are being held to account by Government and the Regulator where they fail to do so. For its part, the Government has a reciprocal obligation to make sure councils have the funding necessary to meet these obligations."

Harry Rodd