Local authority funding crisis ‘putting future of council housing under threat’

The biggest council house landlords in England have warned the future of social housing delivered by local authorities is “under threat” due to the local government funding crisis.

The leaders of 16 Labour, Conservative and Liberal Democrat-led authorities – with each managing around 20,000 homes each – met for a first-of-its-kind summit to discuss the future of council housing on Tuesday (12 March).

Councillors will attempt to come up with a comprehensive plan to fix a broken financial model and enable councils to play their part in addressing the national housing crisis, with their findings to be laid out in a major report later this year.

The move comes as several councils have asked for government support with the growing costs of homelessness, even warning that paying for an increasing number of families living in temporary accommodation is leaving them at risk of bankruptcy.

Councillor Kieron Williams, leader of Southwark Council, said: “Council homes provide affordable and decent homes to our communities and are a critical foundation for a good life. This cross-party strength of feeling must send a warning to the government that we have now reached a critical point and the future of council housing in England is under threat.

“In Southwark, it is our top priority to deliver the new homes our community needs and the critical upgrades to keep our existing residents safe, comfortable and warm. Our national leaders all talk about the importance of council homes to our country, but they are making it impossible for us to deliver our ambitions. However, this summit will agree a pragmatic and practical plan for a new financial settlement with government that will get us back on track.”

Building more social housing is widely regarded as one of the main ways of ending the housing crisis.

Shelter and the National Housing Federation have called for 90,000 social rent homes to be built every year for the next decade with councils playing their part. The two housing groups recently said this could also add a £50bn boost to the economy.

But councils are struggling to make ends meet and there was little respite offered at the Spring Budget.

Councillors at the summit said local authority Housing Revenue Account (HRA) self-financing was introduced in 2012 to allow councils to fund development and maintenance of homes. But high inflation, interest rates and central government caps have slowed and stopped building.

In a joint-statement, the leaders of the 16 councils said “a broken financial model is making our vital work to ensure our residents’ homes are warm, decent and safe increasingly challenging – let alone our ability to build the new homes our communities need”.

The summit comes as the government has given councils powers to extract more funding from empty homes.

From 1 April, local authorities will be able charge double council tax for long-term empty properties after they are vacant for a year rather than two.

Minister for local government Simon Hoare said: “Long-term empty properties are shutting local families and young people out of the housing market as they are being denied the opportunity to rent or buy in their own community. 

“So, we are taking action as part of our long-term plan for housing. That means delivering more of the right homes in the right places and giving councils more powers to help give local people the homes they need.”

On the other hand, the government policy for allowing councils to keep 100% of the receipts under the Right to Buy policy is set to come to an end.

Local authorities were told they could keep 100% of the proceeds – up from 20-25% – from Right to Buy sales last March in a bid to boost the delivery of new council homes.

But chancellor Jeremy Hunt announced the policy would not be extended at last week’s Spring Budget.

The move has sparked concern among local government leaders with London Councils expressing “extreme concern”. The government said the policy was a “temporary measure”.

Darren Rodwell, London Councils’ executive member for regeneration, housing and planning, said: “With London’s homelessness crisis worsening and boroughs’ temporary accommodation costs posing a critical risk to their financial stability, it’s more important than ever to invest in new social housing.

“In the capital we have over 300,000 Londoners on waiting lists for a social home, but we’re also struggling with immense pressures on boroughs’ social housing budgets and viability challenges making housebuilding increasingly difficult.

“We’re therefore extremely concerned that the government will stop letting councils keep 100% of the money raised through Right to Buy sales. This will undermine boroughs’ resources for delivering desperately needed social housing and replacing stock lost through Right to Buy. The government should be doing everything it can to boost boroughs’ ability to invest in new social homes – but instead we could see our funding reduced.”

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