Above inflation rent increases can’t compensate for under-funding of council housing

Driving up rent will impoverish tenants, it won’t resolve the council housing funding crisis.

In explaining our opposition to 10 years of above inflation rent increases and ‘rent convergence’ (No to 10 years of above inflation rent increases – Labour Campaign for Council Housing ) we said that

“These policies are a substitute – to the detriment of tenants – for adequately funding Housing Revenue Accounts. They will not resolve their funding crisis.”

Islington council is an illustration of that. In its Draft Budget¹² proposals for this year we learn that

“It should also be noted that whilst the draft HRA 30-year business plan balances, this is achieved by limiting the budget provision for the investment in existing council homes. The investment gap over 30 years between a traditional investment model and our budget limited resources is £1.169bn.”

“Whilst within the limited budget provision included in the draft HRA 30-year business plan, priority will be given to building safety works and meeting statutory compliancy with
decency standards. The shortfall in available resources will reduce the council’s ability to invest in maintaining the condition of existing homes and over time will lead to significant deterioration in our housing stock.”

So despite increasing rent by the maximum amount, over 30 years the council faces an “investment gap” of more than £1 billion pounds, which will lead to “significant deterioration in our housing stock”.

This gap is not the fault of the council but of national government policy. Islington is by no means unique. Whilst the scale of the “investment gap” varies from council to council, all council HRAs are under-funded.

In an update to the statement “Securing the future of council housing”, signed by 109 councils, a survey found that

“In order to balance their budgets before the next general election:

• 71% of councils expect to cancel, pause or delay current projects
• 68% expect to scale back their overall commitments to redevelop or build new council homes
• 28% expect to sell off existing council homes to make ends meet

Even with these steps, 67% of councils say there is a risk they will not be able to set a balanced budget.”

Nearly half of councils surveyed said they have been forced to use their reserves – funds meant to cover emergencies – to cover day to day spending. More than a third reported that they would empty these emergency funds by the end of this parliament.

Councils feel that they have no choice but to push up rents or they will have even less funding for maintaining the condition of their housing stock. Yet the consequence for tenants who do not have their rent covered by housing benefit or the housing element of universal credit is that they will be further impoverished. There will be more people who will not be able to put their heating on, resulting in more cases of damp and mould at the very time when the government is telling councils that they have to deal with it.

Behind doors lobbying of the government has not shifted them. Councils can hardly expect tenants to support them if they deliver a decade of above inflation rent increases and ‘rent convergence’ (see our Briefing, “Why we oppose rent convergence”). Councils need to come together with their tenants and their trades unions to campaign for the funding that they need for their council housing rather than squeezing more rent from tenants, to compensate for insufficient funding.

1The ‘Fair Funding Review’ leaves Islington’s General Fund with a £40 million funding gap by 2029/30, assuming they raise council tax by the maximum amount.

2See page 59 for the Housing Revenue Account.