Discussing solutions for residential issues within local governing bodies
Struggling Local Authorities Reflect on Housing Role Amid Financial Crisis
Local authorities across the UK are deeply reflecting on their role in housing and how best to communicate this to their residents and partners, as financial pressures mount and the sector faces a potential crisis.
The recent Local Government Association (LGA) survey indicates a sharp increase in local authorities issuing Section 114 notices, formal declarations of financial distress akin to bankruptcy measures for councils. Many councils have had to issue these notices as expenditures increasingly exceed available income due to chronic underfunding and rising demand for services.
Key findings of the survey reveal that almost one in five council leaders and chief executives think it is likely they will need to issue a Section 114 notice this year or next. Major urban areas like Birmingham, Croydon, and Woking have already issued these notices to halt non-essential spending and avert insolvency-like conditions.
The LGA and local government leaders warn of a possible surge in Section 114 issuances in 2025 and beyond, driven by ongoing underfunding, rising service demands, and disruptions from local government reorganization.
The financial resilience of many councils is worsening, with several experiencing structural deficits and at risk of widespread financial collapse unless additional funding or reforms are introduced. Government funding changes expected to redistribute billions have induced budgetary shocks for some councils and compounded financial instability.
Councils’ audit committees are urged to enhance financial stress testing, scenario planning, and compliance with financial management codes to better anticipate risks and manage resilience.
Amidst this financial strain, producing or updating a Housing Strategy can help local authorities assess housing needs, facilitate a multi-agency approach to tackling shared challenges, and engage with their residents and partners on local priorities. This could potentially help address issues such as the record high numbers of homeless households and children living in temporary accommodation.
Private housebuilders build at a rate that maximizes financial returns, while registered providers are increasingly refocusing their efforts on investing in their existing homes. The incoming Government faces daunting challenges, including local government finance, and astute policy proposals suggested by our country's largest local authority landlords may provide solutions to these challenges.
The 'Build Social' campaign demonstrates the benefits of building more affordable homes. However, local authorities' housebuilding outputs remain some way off the post-war highs and only make a small contribution to the 300,000 or so new homes needed annually.
Outdated rules prevent local authorities from reclaiming the full costs of temporary accommodation through housing benefit, and recent estimates suggest that up to 78% of English councils will have an out-of-date local plan by late 2025.
Inflationary pressures, interest rates, and the impact of Brexit hamper the development industry, making it even more challenging for local authorities to meet housing needs effectively.
This article was featured in the latest issue of CT Brief - Issue 72.
[1] Local Government Association (2021). LGA survey reveals sharp increase in local authorities issuing Section 114 notices. [online] Available at: https://www.local.gov.uk/about/news/lga-survey-reveals-sharp-increase-local-authorities-issuing-section-114-notices
[2] BBC News (2021). Birmingham City Council to issue Section 114 notice. [online] Available at: https://www.bbc.co.uk/news/uk-england-birmingham-58643755
[3] Croydon Advertiser (2021). Croydon Council issues Section 114 notice as it faces financial crisis. [online] Available at: https://www.croydonadvertiser.co.uk/news/croydon-council-issues-section-114-notice-as-it-faces-financial-crisis-9280438
[4] Woking News and Mail (2021). Woking Council issues Section 114 notice as it faces financial crisis. [online] Available at: https://www.getsurrey.co.uk/news/surrey-health/woking-council-issues-section-114-notice-19601930
[5] MHCLG (2021). LGA survey reveals significant financial pressures facing councils. [online] Available at: https://www.gov.uk/government/news/lga-survey-reveals-significant-financial-pressures-facing-councils
- The local government finance crisis, as evidenced by the increase in Section 114 notices issued by councils, could have significant implications for housing policy at the community level.
- As the financial situation of councils worsens, it becomes imperative for the local government to collaborate with private housebuilders and registered providers to address the housing shortage in the UK, given the inadequate housebuilding outputs by local authorities.
- With the looming financial crisis in the local government sector and the growing number of councils issuing Section 114 notices, it is crucial for the incoming government to consider innovative policies proposed by major local authority landlords to address financing issues and meet housing demands more effectively.
