£644 million deficit needed to support council house-building

In a historic movement, more than 100 local councils have formed a cross-party coalition to call on the government to provide a one-off injection of funds as well as adding restrictions on the Right to Buy programme to help support council house-building.

A report from the council coalition has claimed that a £2.2 billion ‘black hole’ will form in budgets by 2028 without immediate support.

Council coalition demands

The coalition of more than 100 local councils has called for an injection of £644m from the government to stabilise housing accounts and prevent delays in new houses.

The coalition has warned that the current financial model is “broken” and will create a £2.2bn ‘black hole’ in budgets by 2028.

It is claimed that the previous government – run by the Conservative Party – failed to honour a 10-year deal agreed in 2012 that promised to guarantee rental incomes. Despite delivering “on their side of the agreement”, policy changes imposed new costs on local councils and restricted their income.

The report states that unless swift action is taken soon, most council landlords will “struggle to maintain their existing homes adequately or meet the huge new demands to improve them, let alone build new homes for social rent.”

The councils said: “In recognition of the severe impact the last decade of national policy choices have had on council housing budgets, we call for an emergency capital funding injection of £644m, equal to the income lost from the 2023-25 rent cap.

“This will stabilise our HRAs in the short term and prevent further waste caused by delaying or cancelling investment plans.”

Right to Buy scheme

The coalition of councils has also called for restrictions to be placed on the Right to Buy scheme, which was set up in the late 1970s by then-Prime Minister, Margaret Thatcher.

While ministers have already promised a review of the policy, local councils want suspensions in place for Right to Buy on new-build properties.

They claim that Right to Buy sales are creating an ever-shrinking portfolio of council homes.

Allow councils to build more

Labour has announced that they aim to build 1.5 million homes during their time in office. Deputy Prime Minister, Angela Rayner, says they’re targeting 370,000 new homes per year.

These are record-breaking numbers, though, as the UK has not built 300,000 per year since the 1960s.

The coalition’s report states that “around half of the total supply” of homes built during the 60s were council houses. However, local authorities have not provided more than 2% of new homes for the last four decades, showing a stark drop-off.

Between 1946 and 1980, 126,000 social homes were built each year. It has been more than 30 years since the number reached 10,000 per year.

For the 164 councils that still own their stock, the report argues that “historic funding squeezes” need to be addressed.

Five solutions

The coalition of cross-party councils offered the UK government a set of five recommendations:

• A new fair and sustainable HRA model which includes a £644m one-off injection and long-term, certain rent and debt agreements.
• Right to Buy policy reform.
• Removing red tape on existing funding.
• New, long-term Green and Decent Homes Programmes.
• Restart stalled building projects to avoid the loss of construction sector capacity and a market downturn.

What is the Labour government doing in response?

One of the Labour Party’s priorities after winning the general election in July 2024 was to transform the housing sector to alleviate the growing housing crisis in the UK.

The Ministry of Housing, Communities and Local Government has stated they are “working at pace to reverse the continued decline in the number of social rent homes” and that they’d “already given councils more flexibility to use Right to Buy receipts to deliver more social housing”.

The Deputy PM, Ms Rayner, recently announced mandatory housing targets will be put back into place after the Conservative government removed them. She also stated that 50% of new housing must be affordable “with a focus on social rent”.

Labour’s plan to hit its 370,000 new homes target relies on the following:

• Planning system reform that brings new mandatory building targets for councils.
• Greenbelt review to identify ‘grey belt’ land to meet local housing needs and rules to drive 50% delivery of affordable homes.
• New system to ensure every area has local housing plans.

Speak to housing experts

At ABC+ Warranty, we know all about house-building and the regulations in place throughout the UK.

As such, if you have any questions about plans for new housing or stalled developments, don’t hesitate to contact us.

Also, if you’re a developer in need of a structural warranty, speak to us right away. We have a wide range of choices to cover every type of project.