London Councils urges greater focus on housing costs

The Housing, Community and Local Government Committee have published a new report on local councils, and recommends that reforms to the council funding system should ensure local housing costs are properly accounted for in measures of deprivation used to allocate resources.

London Councils has welcomed the report and is concerned that the deprivation measures in the government’s Fair Funding Review 2.0 proposals do not fully reflect housing poverty and risk significantly underestimating levels of need in the capital. This could cause London boroughs to receive less government funding than needed to deliver local services and be financially stable

One in four households in London are living in poverty, meaning that London has the highest levels of poverty in the country when housing costs are factored in. London Councils says that in the context of the capital’s astronomical rents and housing costs, any measure of deprivation that does not sufficiently factor in housing will fail to account for the single biggest cost of living for residents and a significant driver of service pressures for local authorities. 

As the Fair Funding Review 2.0 uses the Index of Multiple Deprivation to measure deprivation, London Councils is pushing for any income deprivation measure used in the funding formulae to calculate income after housing costs, to better reflect real circumstances, and to reflect the impact of housing as a cause of drpviation. 

Councillor Claire Holland, chair of London Councils, said: “As this report makes clear, the local government funding system is fundamentally broken and change is long overdue.

“The government’s plans to reform council funding are pivotal for ensuring local areas receive funding that genuinely matches their levels of need and enables them to cope with fast-rising costs and pressures. It’s right that the government is targeting deprivation in the new formula, but we are concerned that the measures used in the current proposals will not sufficiently account for London’s extreme poverty. This could mean London is left without the funding we need to deliver vital local services and return to financial stability.

“We will continue to raise these and other issues with government and we welcome the opportunity to work with them to ensure the new funding system is far, robust and distributes funding efficiently.”