London boroughs face £264m council housing budget crisis

London’s local authorities say they are facing a severe financial challenge, with a new report projecting a £264 million reduction in council housing budgets over the next three years.

London Councils says there is growing pressure on boroughs as management costs for social housing soar while revenue lags.

It has published a report, ‘Crunch Point for London Council Housing Finances’, which underscores the problem after years of restrictive national policies of capping rent rises below inflation.

Crunch point for social housing

London Councils’ executive member for housing and regeneration, Cllr Grace Williams, said: “We have reached crunch point for London’s council housing finances.

“Boroughs are frustrated that at a time when we want to invest in our council housing and build new social homes, the grim reality is that many will need to make deep cutbacks.

“We are dealing with fast-rising costs but also the legacy of years of government underinvestment and budget squeezes.”

She added: “Boroughs play an essential role in modernising older properties and building the new affordable homes Londoners are crying out for.

“A better future for London’s council housing is possible but it requires national policy decisions that give us secure and sustainable finances.”

Five boroughs face a crisis

The capital’s councils oversee approximately 390,000 social homes, accommodating over one in 10 households.

These properties, often high-density tower blocks, incur higher maintenance expenses compared to other regions, exacerbating the funding gap.

The report warns that five boroughs risk depleting their Housing Revenue Account (HRA) reserves entirely by 2027/28 without urgent intervention.

The report, developed in collaboration with the London Housing Directors’ Group and the Society of London Treasurers, calls for a revival of social rent convergence.

That was a policy from 2002 to 2015 that aligned rents with local incomes and property values.

Social landlords are vulnerable

The ending of the policy left London’s social landlords particularly vulnerable, as the disparity between formula rents and actual rents remained significant.

Boroughs also advocate for a 10-year rent settlement tied to CPI+1% and relief from HRA debts, which have been inflated by past government policies.

Despite the pressing need to modernise aging properties and construct affordable homes, boroughs face unavoidable spending cuts.

The report’s findings echo national concerns, with a Southwark Council-led coalition earlier this year reporting that two-thirds of council housing budgets across England are teetering on the edge of collapse.

London Councils says it remains committed to collaborating with the government to address these challenges and secure a stable future for the capital’s social housing.

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