Struggles with social housing loom for districts due to budget reductions, officials caution
London Faces Severe Social Housing Financing Strain
London boroughs are bracing themselves for significant financial challenges in managing social housing over the next four years, according to a new analysis. The report, commissioned by the London Housing Directors' Group, paints a bleak picture for boroughs' housing revenue accounts and their ability to invest in social housing.
Cllr Rodwell, London Councils' executive member for regeneration, housing & planning, has stated that boroughs are facing year after year of budget squeezes. He went on to say that the government's rent policy leaves London Councils with a black hole of nearly £700m in social housing finances over the next four years.
The financial strain is due to government-imposed social rent levels, which limit how much councils can charge. This, in turn, results in reduced rental income from social housing stock. The revenue deficits force boroughs to rely more on government grants or borrowing to fund maintenance and new construction.
The impact of costs running higher than rental income is expected to equate to almost £900m over 20 years, according to experts from Savills. This financial strain could lead to delays or cutbacks in new affordable housing projects, exacerbating the existing housing crisis.
In Greenwich, for instance, the council is acquiring over 250 new homes for social rent to address the demand from 28,000 households on the waiting list. However, this acquisition places pressure on their budget and long-term affordable housing strategies.
London Councils have emphasized that social housing is vital to London's social and economic success, and they want the sector to thrive. They have urged ministers to ensure boroughs get the resources they need to secure a better future for London's social housing.
Despite the challenges, boroughs are driving improvements in standards, safety, and net zero that their tenants - and the government - are so keen to see. However, with income failing to meet costs and spending cuts needed to balance the books, it becomes extremely difficult for boroughs to secure the progress they want to see in social housing.
Joanne Drew, co-chair of the London Housing Directors' Group, stated that from damp and mould through to building safety and decarbonisation, there are enormous challenges in the capital. One in 50 people in London were estimated to be homeless in 2023, but no new information about the homelessness rate in London was provided in this report.
London Councils have stated that they need more investment in social housing to address the major housing crisis currently flooding the city. At the beginning of this year, the government confirmed a maximum permitted increase to social rents of 7.7% in 2024-25. However, no new information about the need for more investment in social housing to address the major housing crisis in London or the maximum permitted increase to social rents in 2024-25 was provided in this report.
In conclusion, London boroughs are expected to experience continuing financial challenges in managing social housing due to government-set social rent levels, which limit rental income and increase pressure to find alternative funding to maintain and expand affordable housing stock over the next four years.
- The local government, specifically London Councils, has expressed concern over a black hole of nearly £700m in social housing finances over the next four years, largely due to the government's rent policy.
- With income falling short of costs and spending cuts required to balance budgets, it is challenging for boroughs to secure the progress they aim for in social housing, such as improvements in standards, safety, and net zero.
- Policy discussions in politics and finance circles must consider the need for more investment in social housing to address the major housing crisis in London, given the estimated £900m revenue deficits over 20 years from costs exceeding rental income.
- In the business sector, experts from Savills predict that the financial strain could lead to delays or cutbacks in new affordable housing projects, potentially further worsening the existing housing crisis.
