March 18th 2024
‘Mission impossible’: Boroughs warn of social housing struggles amid budget cuts
Research that has been published today suggests social rent levels set by the government will leave London boroughs with a ‘black hole’ in their finances.
London Councils, the local government association for Greater London, have recently assessed the impact of social rent policy on boroughs housing revenue accounts – the budgets for managing their social housing stock, which includes paying for repairs and maintenance – and drawn a depressing conclusion.
From their research, over the next four years the cross-party group have outlined that there will be a gap worth £700m in social housing finances, despite the capitals ongoing efforts to address the major housing crisis that is currently flooding the city.
In 2023, London Councils estimated that one in 50 people in London are homeless and research from Greater London Authority, which was published in November 2023, found that 18% of private homes in the capital city failed the Decent Homes Standard, as well as 15% of social rented homes and 13% of owner-occupied properties.
However, people who are currently letting a social home are tragically set to struggle even further. At the beginning of this year the government confirmed a maximum permitted increase to social rents of 7.7% in 2024-25.
Although the government policy is to let social rents increase by a maximum of inflation plus an additional 1% (referred to as ‘CPI+1%), boroughs are warning that increases to their social housing costs will remain significantly above increases in their income as inflation on core expenditure such as building materials and repairs contractors is expected to continue outpacing CPI in the next few years.
Experts from Savills – a UK-based estate agency – have claimed that the overall impact of costs running higher than rental income will equate to almost £900m over 20 years.
Cllr Darren Rodwell, London Councils’ executive member for regeneration, housing & planning, said: ‘At a time when we desperately need more investment in social housing, boroughs are facing year after year of budget squeezes.
‘Social housing is vital to London’s social and economic success, and we want the sector to thrive. Boroughs are driving the improvements on standards, on safety, and on net zero that our tenants – but also the government – are so keen to see.’
‘We know cost-of-living pressures remain a major concern for many tenants and we support measures designed to help low-income households struggling with their finances,’ Cllr Rodwell said. ‘However, the government’s rent policy leaves us with a black hole of nearly £700m in our social housing finances over the next four years. Considering the massive pressures the sector faces, it feels like we’ve been left with mission impossible.’
Cllr Rodwell added: ‘Ministers must ensure boroughs get the resources we need to secure a better future for London’s social housing.’
The analysis that was published today incorporates longer-term research commissioned by the London Housing Directors’ Group from Savills.
Joanne Drew, co-chair of the London Housing Directors’ Group, said: ‘This analysis paints a bleak picture for boroughs’ housing revenue accounts and our ability to invest in social housing.’
‘From damp and mould through to building safety and decarbonisation, there are enormous challenges in the capital,’ Drew said. ‘Boroughs have great ambitions as social housing providers, but with our income failing to meet our costs and spending cuts needed to balance the books it becomes extremely difficult to secure the progress we all want to see.’
Image: Alex Tai
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