Today the LUHC Select Committee has published Financial distress in local authorities which says that councils are facing a £4 billion hole in funding. The report blames “systemic underfunding” by central government, and calls for reform of both council tax and the wider funding system to put council finances back on a sustainable footing.

On housing specifically, the report notes that local authorities obliged by law to find accommodation for the homeless are footing an escalating bill created by record levels of homelessness and a continuing chronic national shortage of housing, particularly in the social and private rented sectors.

Local authorities’ statutory obligation to fund expensive temporary accommodation for the homeless is putting unsustainable pressure on council finances. This has been exacerbated by the government’s decision to freeze Local Housing Allowance levels between 2020 to 2024. The committee is calling on central government to set and maintain LHA rates at the 30^th percentile of local rents now and for the foreseeable future.

“Some councils will find themselves struggling to set balanced budgets in 2024/25 and are potentially unable to do so as they look forward to 2025/26. The amount of funding available to councils is out of line with the requirements placed upon them,” the Local Government Association commented.

In a letter from the social housing sector to the Prime Minister and the DLUHC Secretary of State at the end of last week, the NFA added its voice to a plea for government to focus on building more homes for social rent. Other signatories include the heads of the Chartered Institute of Housing, the National Housing Federation and charities such as Shelter, Crisis and St Mungo’s.

Like the LUHC report, they also point to current record homelessness levels and historic cuts in housing budgets. Councils are now struggling with the legacy of a 63% cutback in 2010 in government funding for affordable housing which has since slashed supply; only 9,561 new social homes were delivered in England in 2022-23 compared with 40,000 a decade earlier.

At the heart of the issue, says the letter, there is an “urgent need” for more housing. Since 90% of all social housing allocations already go to UK citizens, further rationing of allocation of the few available homes will do nothing to shorten waiting lists and relieve pressure on council budgets.

“Further rationing of an already scarce resource does not address the fundamental failures of the last 40 years – we have simply not built the homes the UK needs to ensure everybody has a safe and secure place to live,” the letter states.

“Imposing extended qualification periods before people can even get on the housing register is likely to force more people into homelessness. If the government’s main concern is to increase the availability of social lettings, it could achieve this far more effectively by building more social housing.”

Eamon McGoldrick, Managing Director of the NFA, said today: “The evidence from every quarter reaches the same conclusion – the only answer to our housing crisis is more homes.

“At the NFA, we continue to argue – as we have done consistently for the last 20 years – that a healthy national housing market is made up of a well-supplied mix of tenures that includes home ownership, a quality private rented sector and good quality homes for social rent that are genuinely affordable. No policy tweak can deliver this and we continue to make the case for long-term coherent support for our members, their parent councils and the social housing sector.”