Council housing's future remains uncertain - according to a new report
Council Housing in England Faces Financial Challenges, Report Reveals
Local authorities in England are grappling with a difficult choice between pushing housing revenue accounts (HRAs) into deficit or failing to meet statutory repair obligations, including the newly proposed Awaab's Law, according to a report by the Local Government Association (LGA) and recent government reports.
The current challenges for the financial viability of council housing include insufficient new council housebuilding, the impact of the Right to Buy scheme, high demand with large waiting lists, skills and capacity shortages, and escalating day-to-day repairs costs.
Over the past five years, councils have only built around 8,000 new affordable homes annually, while fewer than 40% of council homes sold under Right to Buy since 2012 have been replaced. The Right to Buy scheme reduces council housing stock and undermines councils’ financial ability to rebuild or maintain their portfolio, as councils lose homes before recovering building costs.
The high demand for social housing is evident, with about 1 million people on social housing waiting lists, and 160,000 children in temporary accommodation. The skills and capacity shortages in the construction industry make it challenging for councils to accelerate housebuilding.
Day-to-day repairs costs are spiraling well above the rate of CPI inflation, putting additional strain on HRAs.
To address these financial and operational challenges, the LGA proposes several solutions and reforms. These include reforms to the Right to Buy scheme, such as increasing the minimum tenancy period to qualify for Right to Buy from 3 to 10 years, limiting discounts especially for new builds, and exempting newly built social homes from Right to Buy for 35 years.
The LGA also advocates for allowing councils to retain 100% of Right to Buy receipts indefinitely and combine these with government grant funding to accelerate new council homebuilding. A ten-year rent settlement and consultation on rent convergence are proposed to provide financial stability and predictability for councils and social landlords.
Equality of access for social landlords to building safety funds is also advocated to reduce safety-related costs and liabilities. Support for borrowing through the Public Works Loan Board (PWLB) is proposed to give councils better access to affordable capital for investment in housing.
The Council Housebuilding Skills & Capacity Programme, a £12 million partnership between the LGA and Homes England, aims to build the workforce skills necessary for sustained council homebuilding.
Cllr Adam Hug, the LGA's housing spokesperson, stated that the current situation of council housing is the most precarious in over a decade and urgent action is needed. He proposed strengthening and providing 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.
Mike Ainsley, chair of the NFA, echoed the need for a strong financial settlement to restore lost rent revenue and make HRAs viable. The report by Savills, in partnership with the NFA and Association of Retained Council Housing, emphasized the need for further government investment to help respond to priorities like retrofit and building new council homes.
The LGA's 2024/25 annual report also emphasizes that their sector support programmes provide significant cost savings and capacity building for councils, which indirectly contributes to the financial sustainability of local government functions, including housing delivery. However, no single solution exists; the approach involves coordinated policy, funding, skills, and regulatory reforms.
References:
- LGA (2021). Housing Revenue Accounts: The Impact of Government Policies and Economic Factors.
- Savills (2021). The Financial Viability of Council Housing Revenue Accounts: A Report by Savills, in Partnership with the NFA and Association of Retained Council Housing.
- NFA (2021). The Future of Council Housing: A Report by the National Federation of ALMOs (NFA) and Association of Retained Council Housing.
- LGA (2021). LGA's 2024/25 Annual Report.
Personal-finance challenges for local governments managing housing in England have been escalating due to insufficient new council housebuilding, high demand, and escalating day-to-day repair costs. To alleviate these budgeting issues, the Local Government Association (LGA) proposes reforms in the Right to Buy scheme, retaining a larger portion of Right to Buy receipts, and increasing investment in skills and capacity programs to support council housebuilding.
