20 councils warn Labour. Their housing finances are in crisis

Councils in England “will be tipped over the financial cliff” without an urgent funding boost to build new homes and repair their existing stock, a group of 20 local authorities has warned.

In a warning to Sir Keir Starmer’s new government, the group said and that rising emergency accommodation costs for homeless households and restrictions on their housing budgets are leaving them stranded as they try to tackle the housing crisis.

The councils, which include Labour-led local authorities, want the party to reform the Right to Buy scheme, give them extra grant funding and support the government to borrow more and affordably to build their own homes social.

The cross-party group includes Birmingham, Bristol, Camden, Dudley, Greenwich, Hackney, Hull, Islington, Kirklees, Lambeth, Leeds, Leicester, Lewisham, Newcastle (upon Tyne), Nottingham, Rotherham, Sandwell, Southwark, Sheffield and Wolverhampton.

Labor councilor and leader of Southwark Council Kieron Williams said and that local authorities have reached a “dangerous tipping point” as they struggle to build affordable housing due to economic pressures.

But Chancellor Rachel Reeves has made a commitment to strict fiscal rules a key part of her pitch to voters, meaning Labour’s spending plans are limited. The party has signaled that private investment will instead play a key role.

Deputy Prime Minister and Housing Secretary Angela Rayner, who grew up in a council house, has pledged to increase the amount of affordable housing, but the Labor government has yet to commit to an exact number of new social homes.

The Housing Revenue Account (HRA) is a local council funding fund to spend money on and receive income from housing. It’s earmarked money that’s in their total funds. Councils are not allowed to budget for an HRA shortfall and if they want to borrow they must do so within strict limits.

Restrictions on their HRA funding are preventing local authorities from building new affordable homes, maintaining their existing council housing stock and making vital improvements such as modernization and fire safety, they say.

Rose Grayston, an independent housing expert who produced a report on the issue on behalf of the group, said and: “There is a problem with the HRA because councils can no longer afford to borrow. If we don’t fix this, councils won’t be able to play their part in solving the housing crisis.”

20 council housing applications to Labour

• Come up with a new ‘fair and sustainable’ model for the Housing Revenue Account, committing to a long-term plan for how much council rents can rise.
• Increasing the space that local councils have to borrow to build and returning to offering local councils more favorable lending rates for investment.
• Reform ‘unsustainable’ Right to Buy policies by reducing rebate levels and protecting newly built council homes for sale.
• Announce a new long-term capital-funded Green and Decent Homes Program to bring all council housing to the new standard of safety, decency and energy efficiency by 2030.
• Extend grant funding to complete new council homes and fund councils to take over private development projects that have stalled due to problems in the construction sector caused by the current downturn in the housing market.

Instead of increasing their supply of council homes, the group warned that they are being forced to cancel new builds and refurbishments and even sell homes so they can afford to keep existing residents safe by carrying out vital repairs, refurbishments and refurbishments. fire safety. .

This urgent funding problem is piled on top of another problem, they say. Supporting homeless households now consumes more than half of the worst-hit local councils’ total housing budgets, which is paid out of the local authority’s total revenue account, as opposed to the HRA.

The councils which have come together to call on the new Government to act in what they hope is a “timely intervention” are cross-party, led by Labour, the Liberal Democrats, the Greens or the Conservatives.

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They cite key pressures including the Right to Buy scheme, which allows councils and some social homes to be sold at a discount to market value in private ownership, and the fact that councils in England are now spending a record £1.7bn on year on a temporary basis. accommodation for homeless households.

Homelessness is on the rise and there are now a record 109,000 households living in temporary accommodation, including 142,490 children.

Temporary accommodation is expensive. Councils argue that if they had enough of their own housing stock to accommodate homeless families, they would spend less on hotels, B&Bs and emergency accommodation.

and recently reported that spiraling temporary housing could push a growing number of councils into “bankruptcy”.

Councils issue a Section 114 notice when they are financially strapped. This is comparable to filing bankruptcy. In 2023, Birmingham Council did just that and announced it would increase council tax by 21% over two years. He also cut his housing budget.

The group says building new council-owned social homes would reduce temporary accommodation bills and therefore risks to councils’ overall budgets.

Sarah Allen, Labor councilor and cabinet member for housing at Rotherham Council, said and that balancing the growing demand for housing with the funds to build it was a “burden”.

“The sheer number of people coming to us because they’ve become homeless and need a place to live creates a huge demand,” she said. “We need to be able to raise incomes so we can build more houses.”

Tony Dyer, a Green Party councilor and leader of Bristol City Council, echoed Ms Allen’s concerns.

“To be honest, we don’t have enough funding,” he said. “What we can spend on new housing is based on existing rents. The vast majority of our housing stock is old – it was built in the 1930s-1950s, when most council housing was built, and we have rising maintenance and upkeep costs, so what we can spend to invest in new homes is limited. ”

“Getting the kind of investment we need will require major policy changes that we have yet to see from a Labor government,” Mr Dyer added.

Mr Williams, who wrote the foreword to the group’s joint report on the council’s housing emergency, said: “Continue on this path and fewer and fewer people will benefit from the transformative impact of good quality council housing.”

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“We are left with very limited options as to where we can get revenue from,” Mr Williams continued. “The vast majority of our income comes from council house rents, but these rents are rightly capped by the government and are no longer enough to cover our costs.”

“This leaves many of us in the unenviable position of not being able to build and even consider selling homes that we urgently need.”

“However, this tragedy is not inevitable,” he said.

In her first speech as chancellor, Ms Reeves focused on housebuilding efforts to top 1.5 million new homes by the end of Labour’s first five years in power. However, she said the Government would not be directly involved in the “business of building council houses” and Labor has not yet specified how many of these new homes will be for social rent.

Mr Williams and his colleagues said it would be a disaster for local authorities without these proposed changes to the HRA and Right to Buy reform.

If nothing is done, he said both “economic growth and local construction markets are at risk.”

“Our report sets out a blueprint for how national and local governments can work together over the next decade to modernize and build the homes Labor promised.”

The Treasury and the Department for Housing, Communities and Local Government have been approached for comment.