According to the report, the emergency funding will make up for income lost from the 2023-25 rent cap
Ministers should provide £644m in emergency capital funding to stabilise councils’ Housing Revenue Accounts, according to a a new report commissioned by Southwark Council and backed by more than 100 other councils
The report states that the one-off capital funding injection of £644m equates to income lost due to the rent cap from 2023 to 2025.
The report, titled ’Securing the future of council housing’, which will be launched at an event at Central Hall, Westminster, today says that the HRA system “is now in a perilous state and even a new rent settlement alone cannot fix it.”
In addition to the multi-million pound emergency funding, the report calls for a new fair and sustainable HRA model.
It states that a new settlement should uphold the principle that tenants’ rents should primarily cover the cost of maintaining their homes, and any additional financial demands on councils should be funded separately by the government.
The councils have also called on the government to nationalise a share of HRA debts to give councils the ability to raise fresh finance for new investment.
Currently, HRA headroom is estimated at between £10bn and £15bn, but this investment capacity is distributed unevenly between councils compared to the stock they own and manage.
The report also calls for the re-opening of the 2012 self-financing deal and negotiating a new agreement that better reflects the financial realities faced by councils.
On funding, the recommendations are to remove the red tape on the Affordable Homes Programme (AHP) and other funds.
Local authorities propose extending the AHP’s strategic partnership model to all councils, allowing them to use a single AHP grant allocation flexibly across various development projects, as already happens for councils in London.
In regard to council properties meeting the decent homes standard, councils report that budget cuts since 2010 hindered progress toward achieving the 100% decent homes standard, and that more homes have fallen below the standard as stock has aged.
The report states that a new ‘Green and Decent’ programme, is now needed, on a similar scale to the original Decent Homes Programme, to be a priority in the 2025 Spending Review.
It also suggests that restoring HRAs to financial stability would provide the necessary funds for councils to ensure their homes are safe and maintained in the way the HRA used to do.
The report also recommends reforming right-to-buy policies by lowering discounts and eligibility and preventing newly-built council homes from being sold. In addition, it urges the government to mitigate the short-term loss of housing supply and construction capacity due to the market downturn by providing funding to help councils rescue and complete stalled development projects.
Kieron Williams, leader of Southwark Council, said the positive response they received to their interim report in July was “overwhelming” and that the government has already started to implement some of their recommendations.
>> See also: North London council faced with £1.8bn HRA funding gap
>> See also: HRA debt reduction of £17bn needed to tackle council underinvestment in housing, new report finds
Williams added: “There is still much more to do. Lifting the quality of our existing council homes up to modern, safe, healthy and green standards is a huge task.
“As is delivering the new council homes our communities urgently need. The perilous state of our national council housing finances must be addressed if we are to succeed.”
He said that previous governments have repeatedly stepped in over the past decade to both reduce council rents and set higher standards that council landlords must meet.
Williams said: “these decisions were often made for good and vital reasons, but the combination has created a rapidly widening financial chasm – with councils’ income to cover the cost of managing and maintaining their homes plummeting whilst their costs rocket.”
He continued: “A succession of events impacting our economy, construction costs and interest rates have then turned this chasm into a crisis. Our five solutions provide a pragmatic long-term plan to turn this around.”
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