Photo credit: www.theguardian.com

Crisis in Social Housing: Councils Face Financial Strain

More than 25% of local councils in England anticipate having to sell housing assets to maintain balanced budgets, while over a third have already reduced spending on repairs and maintenance. This trend underscores a dire situation in social housing finance.

A recent study, conducted by Southwark Council, analyzed the responses of 76 stockholding councils, all of which manage their own social housing. The findings revealed that 90% of these councils expect to rely on emergency funds in the coming years, and 71% are likely to postpone or cancel ongoing housing initiatives.

In light of these actions, two-thirds of the councils surveyed warned of the possibility of failing to achieve a balanced budget.

This research points to the significant challenges facing Angela Rayner, the Secretary of State for Housing, Communities and Local Government. Rayner, who also serves as the Deputy Prime Minister, has advocated for increased central government investment in social housing, aligning with a broader objective to construct 1.5 million new homes during the current parliamentary term.

In November, she initiated a consultation aimed at potentially limiting the right-to-buy scheme, which allows tenants to purchase their homes at a subsidized price. This program has contributed to the decline in social housing availability since the 1980s.

Survey results indicated that, despite such initiatives, council housing budgets are nearing critical failure, with Southwark Council assessing them to be “on the brink of collapse” in the near future.

Additionally, the survey discovered that 61% of councils have already halted or delayed new housing developments, while 68% expect to reduce their broader goals for building or renovating social homes. A notable 37% have made cuts to maintenance and repair services.

To mitigate financial pressures, 28% of councils indicated they might need to divest existing housing stock, with 45% already employing reserves for everyday expenses. Of the councils surveyed, 71 reported at least one sign of financial distress related to housing.

Some councils have taken proactive measures to address funding gaps. Approximately 13% have acknowledged selling homes to cope with shortfalls, while 11% have sought external borrowing.

Kieron Williams, the Labour leader of Southwark Council, emphasized the critical role of council housing in the government’s commitment to building 1.5 million new homes, stating, “Without substantial further action, councils will struggle to meet needs at scale or improve existing homes to adequate standards for the future.”

Notably, while Rayner successfully secured £500 million from the Treasury for social housing through the government’s affordable homes initiative, this amount fell short of the anticipated £1 billion, prompting concerns from local government advocates about the pressing need for further support.

Adam Hug, the councillor and housing spokesperson for the Local Government Association, remarked that council housing is in its most precarious state in over a decade, underlining the urgency for remedial measures to ensure local authorities can fulfill their responsibilities in providing quality council housing.

To enhance their housing initiatives, councils require appropriate powers, skills, resources, and funding and seek collaboration with both the government and the housing sector.

In a collective move last September, 109 councils across England endorsed recommendations aimed at improving the social housing landscape. These included calls for a new model to replace the 2012 Housing Revenue Account—an arrangement councils deemed unsustainable—as well as proposing investment strategies to modernize existing properties and establish realistic budgets for new projects.

A spokesperson for the Ministry of Housing, Communities and Local Government affirmed their commitment to collaborating with councils in achieving the target of 1.5 million new homes. The spokesperson acknowledged the historical challenges faced by local governments due to short-term fiscal decisions and outlined steps already taken, including necessary reforms to the right-to-buy scheme and additional funding for affordable housing, with further measures to be unveiled soon.

Source
www.theguardian.com