Councils call for housing policy reform in face of £2.2bn budget gap

The group, which consists of some of England's largest councils - including Southwark, Bristol, Sheffield, Leeds, Birmingham and Dudley - met at a summit in March to address what they described as "an increasingly urgent financial crisis" in local government.

Ahead of a full report to be published later this year, authored by Toby Lloyd and Rose Grayston, the coalition released an interim report summarising their five recommendations for the new government to improve HRAs, bring homes up to modern and green standards, and build more council homes.

The report warns that an unsustainable financial model and erratic national housing policy changes have squeezed council budgets and sent costs soaring.

It also highlighted a new analysis from Savills showing that councils' housing budgets will face a £2.2bn 'black hole' by 2028.

It warned that most council landlords will struggle to maintain their existing homes adequately or meet new demands to improve them, let alone build new homes for social rent.

The report also pointed to development projects being cancelled and delayed across the country and said councils could be forced to sell more of their existing council housing stock to finance investment in council homes.

The report set out the following five recommendations for the new government:

• A new fair and sustainable HRA model – including an urgent £644 million one-off rescue injection, and long-term, certain rent and debt agreements.
• Reforms to "unsustainable" Right to Buy policies
• Removing red tape on existing funding
• A new, long-term Green & Decent Homes Programme
• Urgent action to restart stalled building projects, avoiding the loss of construction sector capacity and a market downturn

Cllr Kieron Williams, Leader of Southwark Council, said: "Erratic policy choices from our last government have left council housing finances completely broken and the system's future is in danger.

"Councils are being forced to cancel new build developments, and even sell off council homes, to focus on keeping their existing residents safe."

He added: "We are releasing this interim report now, from England's largest council landlords, because we want to work with the new government from day one to deliver the more and better council homes that our communities need.

"With a growing number of council landlords on the brink, urgent action is needed to but our national council housing finances back on firm foundations. Our 5 solutions set out how we can work together to achieve this, and to secure council housing for generations to come."

Earlier this week Islington Council said it would lobby central government for a more favourable rent settlement, after revealing that its Housing Revenue Account (HRA) is “under significant pressure" because of an estimated reduction of £60m annually over the 30-year business plan.

Adam Carey