Council housing finances face ‘perfect storm’

Rising costs and a perfect storm of financial and policy pressures have pushed Housing Revenue Accounts to the brink. 

Conducted by Savills’ affordable housing specialists and commissioned by the NFA, the Local Government Association and the Association of Retained Council Housing, today’s report published at the LGA conference explores the cumulative impact of policy and economic pressures on the ability of local authorities to maintain current housing stock and build more.

The NFA has published a brief guide to the key points of the analysis, explaining why councils have no capacity at all to contribute to the government’s ambitious goal of 1.5m new homes over the next five years and can barely sustain current levels of management. 

Many councils are facing the impossible choice of whether to let HRAs go into debt or instead fail to meet statutory repair obligations. Awaab’s Law, which will add tight deadlines to the obligation to fix reported hazards such as mould and damp, is expected to be enacted within the next few weeks – and councils are already struggling to find the resources they need to meet their current obligations.  

Council housing managers are specifically asking government for:

• rent increases that reflect real-world housing management costs – CPI + 1% is not enough; and it cannot reverse the debt HRAs have been saddled with.
• a new financial settlement that, over the next ten years, brings rents back to where they would have been had government not capped increases in 2023.
• a substantial cash injection from Government to cover the black hole left in HRAs by the outdated assumptions of the 2012 self-financing rent settlement.
• a revised debt settlement to reduce the proportion of rent that goes to meet interest charges.
• a consistent, sustained programme of grant funding to cover the increasing asks of council landlords, such as the decarbonisation of homes.
• grant funding to support the building of a new generation of council homes.