Research finds many local authorities are planning to scrap or scale back development plans due to limited resources.
Most local authorities in England are on the brink of a financial crisis, jeopardising their ability to deliver new social housing on the scale promised by the Government’s so-called “council housing revolution.”
Research commissioned by Southwark Council has revealed that two-thirds of 76 councils, managing more than 870,000 homes collectively, are facing significant risks to their housing budgets. The findings suggest many councils may be unable to balance the books by the end of the decade.
The survey disclosed that 93% of councils’ housing budgets are already under financial strain, forcing many to take “substantial action,” including dipping into emergency reserves. Alarmingly, 61% of councils have cancelled, paused, or delayed housebuilding projects, with 68% preparing to scale back plans for building new homes or redeveloping existing ones.
In addition, 28% of councils indicated they might sell off council housing to secure financial stability. With soaring costs, capped housing-related incomes, and policy changes over the past decade, 67% of councils warned they are at high risk of failing to set balanced budgets by 2029.
A key labour pledge at risk
Delivering 1.5 million new homes, with a focus on council and social housing, is central to Labour’s housing policy. Deputy Prime Minister Angela Rayner has made the pledge a personal mission, highlighting her own experience growing up in a council house.
“I haven’t got to where I am today in spite of coming from a council house, but because of it,” Ms Rayner stated. She announced the Government’s intention to publish a long-term housing strategy in August, aiming to address the nation’s housing crisis.
Despite recent measures such as reducing Right to Buy discounts and introducing a new social rent settlement, the survey indicates that councils are struggling to cope with financial pressures.
Kieron Williams, leader of Southwark Council, warned: “The Government’s ambition to build 1.5 million 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 bring existing homes up to green and decent standards fit for the future.”
Calls for emergency support
Last year, Southwark joined 100 other councils in calling for an emergency injection of £644 million to stabilise housing accounts and prevent further delays or cancellations of investment in new homes. They identified a £2.2 billion funding shortfall in councils’ dedicated housing budgets by 2028 and called for a sustainable financial framework to address these challenges.
The councils also emphasised the need for long-term capital investment to modernise ageing social housing stock and build new homes at a scale that meets growing demand.
Government promises and challenges
A spokesperson for the Ministry of Housing, Communities and Local Government acknowledged the challenges but expressed optimism about the Government’s forthcoming housing strategy.
“The upcoming Government housing strategy presents a major opportunity to give council landlords the headroom and the confidence to invest in the homes our country needs,” the spokesperson said.
The strategy includes reforms to the Right to Buy scheme and an additional £500 million for the Affordable Homes Programme. The Government has also unveiled a new National Planning Policy Framework, granting councils greater powers to increase the supply of social housing.
“This Government will deliver 1.5 million homes as part of our Plan for Change, including the biggest social housing boost in a generation,” the spokesperson added.
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Declining social housing stock
The proportion of affordable or social housing in England has declined from 20% in 2000 to just 16% in 2023, despite rising demand. Many councils now face the difficult choice of either scaling back their housing ambitions or cutting essential services such as repairs and maintenance.
Mr Williams of Southwark Council expressed cautious hope, stating: “The Government’s fast implementation of many of our report’s recommendations – including Right to Buy reforms and a new social rent settlement – gives us hope for the future of council housing.
“However, like many councils, we have had to pause our ambitious home-building programme on several sites, and our Housing Revenue Account is now under intense strain.”
The Government’s Plan for Change aims to reverse the decline in social housing stock, delivering what it describes as the “biggest increase in social and affordable housing in a generation.”
However, with councils warning that financial constraints could derail these plans, questions remain over whether the housing revolution can truly be realised without further investment and structural reform.
