LGA calls for urgent government action on council housing finances

New analysis from the Local Government Association (LGA) has revealed that the future of council housing finances hangs in the balance with rising costs and increasing pressures pushing budgets to the brink.

The research was commissioned by the LGA, the National Federation of ALMOs and Association of Retained Council Housing and carried out by Savills. It explores the cumulative impact of historic and proposed government policies and wider economic factors on the viability of council Housing Revenue Accounts (HRAs).

The report was published at the LGA's Annual Conference.

It found that the financial challenges which are plunging the future of council housing in serious doubt are the result of a combination of different pressures.

The LGA says that councils will then be facing the impossible choice between HRAs going into deficit and failure to meet statutory repair obligations.

The research found that the impact of rent cuts from 2016-2020 and the rent cap in 2023 has resulted in much lower levels of anticipated income than had been promised by the then Government.

It is acknowledged that the pressures are in part due to recent turbulence in the economy and markets – with high inflation and interest rates – but also a result of a range of national government policy interventions since the 2012 HRA self-financing settlement was agreed.

Ahead of the Autumn Budget, councils are urging the government to restore lost revenue due to the recent rent cap, which is estimated to be more than £600 million.

The LGA is calling 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 and 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.

It also wants 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.

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.”

Mike Ainsley, Chair of the NFA said: “This report is solid evidence that our national housing catastrophe cannot be addressed without a strong council housing sector. The Savills data paints an unambiguous picture of the dire state this sector is in after years of decline. We urgently need a strong financial settlement to restore lost rent revenue and make HRAs viable. Only then can we provide the good quality social housing that the country needs.”