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Boroughs warn of ‘mission impossible’ on social housing amid £700m budget ‘black hole’

  • April 16, 2024
  • 2 min read
Boroughs warn of ‘mission impossible’ on social housing amid £700m budget ‘black hole’

New analysis suggests social rent levels set by the government will leave London boroughs with a “black hole” in their social housing finances of up to £700m over the next four years, despite the “desperate” need to improve housing conditions and build new homes in the capital.

  1. The cross-party London Councils group has assessed the impact of social rent policy on boroughs’ housing revenue accounts (HRAs) – effectively the budgets for managing their social housing stock, which includes paying for repairs and maintenance.
  2. The analysis incorporates longer-term research commissioned by the London Housing Directors’ Group from Savills, which forecasts that London boroughs will have to make savings to their HRA budgets for the next twenty years due to social rent constraints and the current impact of inflation.
  3. Social housing finance pressures are a particular concern in the capital. London boroughs let around 390,000 social homes and are making the case for more flexibilities and sustainable funding arrangements from central government. 
  4. The government confirmed in January a maximum permitted increase to social rents of 7.7% in 2024-25.

Although official government policy is to let social rents rise by a maximum of inflation (measured by the Consumer Price Index, CPI) plus an additional 1% (referred to as ‘CPI+1%’), in five of the past seven years the government has intervened to set rent levels well below inflation – leading to significant deficits in HRAs.

With inflation on core expenditure such as building materials and repairs contractors expected to continue outpacing CPI in the coming years, boroughs warn that increases in their social housing costs will remain significantly above increases in their income despite a return to the CPI+1% rent policy. The cumulative impact of costs continuing to run higher than rental income will equate to nearly £900million over twenty years, according to Savills.

London Councils warns that this squeeze on social housing resources represents a substantial real-terms reduction in funding available for improving housing conditions and building new homes. Boroughs anticipate the majority of the savings they are required to make will come out of their budgets for social housing development and for undertaking repairs.

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