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Quarter of English councils may have to sell homes to balance books, study finds

2025-01-19 10:00

More than a quarter of English councils expect to have to sell homes to balance their housing budgets while over a third have cut back on repairs and maintenance in what has been described as a crisis in social housing finance.

Based on responses from 76 stockholding councils, which manage their own social homes, the study found that nine in 10 expect to use emergency funds to try to balance the books in the next few years, and 71% say they are likely to delay or cancel ongoing housing projects.

Despite such measures, two-thirds of the councils said there was a risk they would still not be able to set a balanced budget.

The study, compiled by Southwark council, in south London, and covering a combined stock of more than 870,000 homes, highlights the scale of the task facing Angela Rayner, the housing, communities and local government secretary, who has pledged to revitalise social housing.

Rayner, who is also deputy prime minister, has pushed for more central government spending on social housing as part of a wider plan to build 1.5m new homes across the five years of the current parliament.

In November, she announced a consultation on ways to restrict the right-to-buy scheme, under which council tenants can buy their homes at a significant discount, which has severely reduced the availability of social housing since the 1980s.

The responses to the survey indicate that despite measures like this, council housing budgets are “on the brink of collapse” in the next few years, Southwark said.

The survey found that 61% of councils have already paused or put off new developments, with 68% expecting to have to scale back wider commitments to build or renovate social homes. A total of 37% have cut back on repairs or maintenance.

As part of other efforts to balance budgets, 28% of councils said they expected to sell off existing housing stock, while 45% are already using reserves to cover day-to-day spending. Of the 76 councils, 71 highlighted at least one sign of financial stress over housing.

Some have already begun to take significant measures to reduce shortfalls, with 10 councils, 13% of the total, saying they had already sold homes to do this, and 11% having borrowed money.

Kieron Williams, the Labour leader of Southwark council, said: “The government’s ambition to build 1.5m new homes is critical to ending the housing crisis and council housing must play a central role in this effort.

“However, without significant further action, councils will be unable to build at scale and unable to bring existing homes up to green and decent standards fit for the future.”

While Rayner managed to extract £500m from the Treasury for social housing through the government’s affordable homes programme, this was less than the £1bn predicted by some in advance, and organisations representing councils are warning that more needs to be done.

The councillor and housing spokesperson for the Local Government Association, Adam Hug, said it was “the most precarious position that council housing has been in for over a decade”.

He added: “Urgent action is needed to ensure that local government can keep up with its obligations around providing decent quality council housing.

“In order to deliver more housing of a decent standard, councils need the right powers, skills, resources and funding to act, and want to work with government and the development and housebuilding industry.”

In September last year, 109 councils around England jointly signed up to a series of recommendations for measures aimed at improving the situation, including a replacement for the 2012 Housing Revenue Account (HRA), the supposedly self-financing arrangement for social housing expenditure and income, which councils said is unsustainable.

Other ideas include an investment plan to modernise existing social homes, and a realistic budget to build new ones, as well as changes to right to buy, which were subsequently announced.

A spokesperson for the Ministry of Housing, Communities and Local Government said it would work with councils to reach the target of 1.5m new homes.

They said: “We know that local government has suffered from years of short-term decisions, which is why we have already set out important steps to help them deliver the homes we need.

“That includes overdue reforms to the right-to-buy scheme and an extra £500m for the affordable homes programme, and we will soon set out further measures.”

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