Council housing's future uncertain - study revealed
The Local Government Association (LGA) has published a new report, shedding light on the financial struggles and maintenance issues facing England's council housing system. The report, conducted in partnership with Savills, the National Federation of ALMOs (NFA), and the Association of Retained Council Housing, outlines several proposed solutions to address these challenges.
The estimated loss of revenue due to the rent cap is over £600million, a figure that underscores the urgency of the situation. Council housing is in a precarious position, according to the LGA's housing spokesperson, Cllr Adam Hug, who emphasizes the need for urgent action.
The LGA is calling for the government to restore lost revenue due to the rent cap and introduce a long-term rent settlement to give councils certainty on rental income ahead of the Autumn Budget. Without this, authorities will inevitably face the choice between HRAs going into deficit or failure to meet statutory repair obligations, including Awaab's Law.
Day to day repairs costs are spiraling well above the rate of CPI inflation, and pressures arising from new qualifications for housing staff are also a concern. The increase in the amount of capital investment needed for existing council housing is a significant challenge, as it involves investing in upgrades to meet the Decent Homes Standard and net zero carbon requirements.
The report also mentions the impact of rent cuts from 2016-2020 and the rent cap introduced in 2023. The LGA suggests 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.
One of the main issues highlighted in the report is local authorities across England don't have enough money to maintain council houses. To address this, the LGA proposes several solutions:
- Overhaul of Council Tax and Greater Fiscal Devolution: The Housing, Communities and Local Government Committee recommends a comprehensive reform of council tax, which it describes as "unfair and regressive," and suggests devolving more fiscal powers to local councils. This could include allowing the introduction of new local taxes (e.g., tourist levies) to increase revenue streams and enable councils to better fund housing and other local services.
- Reform of Council Funding System to Reflect Housing Costs: London Councils and the parliamentary report highlight the need for council funding formulas to properly account for local housing costs and deprivation. This would ensure that areas with high housing poverty, like London, receive sufficient government funding to maintain council housing and local services effectively.
- Government Exceptional Financial Support Packages: Some councils, such as the Royal Borough of Windsor and Maidenhead, depending on substantial exceptional support from the central government alongside moderate council tax increases, to sustain housing service delivery and maintenance, recognizing the impact of structural deficits from historic funding cuts.
- Long-Term Investment and Renewal Plans: The government has set out a "decade of renewal" plan for social and affordable housing, emphasizing significant increases in housing supply alongside improvements in safety and quality. This plan builds upon recent increased investment announced in Spending Review 2025.
- Engaging Institutional Investment: There is a growing focus on involving private sector pension investors in affordable housing to increase funding, as many savers show willingness to support housing through pension schemes. This approach could inject new capital for housing maintenance and development.
In summary, the solutions combine reforming funding frameworks to better reflect true housing needs, expanding fiscal autonomy for local authorities, securing continued government support, committing to sustained investment programs, and mobilizing new investment sources to ensure council housing systems can address financial and maintenance challenges effectively. The LGA's report also emphasizes the need for further government investment to address priorities such as retrofit and building new council homes to avoid putting all the pressure on HRAs and residents. Mike Ainsley, chair of the NFA, agreed that a strong council housing sector is necessary to address the national housing crisis and that lost rent revenue needs to be restored to make HRAs viable.
- The Local Government Association (LGA) has suggested the need for a comprehensive reform of council tax, considering it as unfair and regressive, to provide local councils with more fiscal powers and increase revenue streams for housing maintenance and other local services.
- To address the issue of insufficient funds for council house maintenance, the LGA proposes devolving more fiscal powers to local councils, allowing them to implement new local taxes, such as tourist levies.
- The LGA also recommends that the funding formulas for council funding should properly account for local housing costs and deprivation to ensure that areas with high housing poverty receive sufficient government funding for effective maintenance of council housing and local services.
