Above-inflation rent increases won’t resolve the council housing financial crisis

Given this context, what will be the consequence of five or 10 more years of above-inflation increases other than increasing arrears, putting more financial stress on more tenants? They are being penalised for the under-funding of Housing Revenue Accounts (HRAs), which results from central government policy.

The Chartered Institute of Housing warned: “In theory, it would be possible to change rent policy to allow rents to increase faster and to a higher level – but there would be extra costs in terms of increased benefits payments and risks in terms of social rents beginning to approach or exceed market rents if this was pursued over an extended period.”

The Securing the Future of Council Housing report, supported by 108 councils, has warned that HRA finances are unsustainable. The extra 1% a year only provides around £74m extra income, which is a negligible amount and will have little impact on the financial crisis.

“What sense does it make to drive rents up to a level where more tenants won’t be able to afford them and councils will collect less and less of their rent?”

Instead of supporting above-inflation increases, councils should focus on campaigning for the government to fund them sufficiently to maintain and renew their existing stock. 

What sense does it make to drive rents up to a level where more tenants won’t be able to afford them and councils will collect less and less of their rent? If a tenant cannot afford a council rent, what can they afford? Private sector rents are way beyond their reach. 

A recent survey by Southwark Council, answered by 76 councils with more than 800,000 homes, reinforced this warning. It reported that “two-thirds of council housing budgets are on the brink of collapse” and at risk of being unable to set a balanced budget by the next general election.

“Years of financial strain have forced councils across the country to reduce their maintenance of council homes, cancel new build projects and even sell off existing housing stock,” the report said.

While most council rents are way below the housing benefit level, rents will be driven up to the point where it does not cover the rent. This is already the case with some ‘affordable rent’ levels. 

The government has to face up to the question: is it going to allow the deterioration of existing council housing?

Unless it addresses the demands of the Securing the Future of Council Housing report, the living conditions of tenants will worsen. This is a future that we cannot accept. There can be no renaissance of council housing unless this problem is resolved.

Since April of last year, new consumer standards were introduced. To check whether councils are adhering to them, the Regulator of Social Housing has begun to carry out inspections of HRAs. The results of these inspections underline a deepening crisis. They are showing some serious problems with the condition of existing stock and the work of councils. Out of the 27 councils given grades so far, 15 have been graded C3, indicating “serious failures” and two were graded C4, indicating “very serious failings”.

“Out of the 27 councils given grades so far, 15 have been graded C3, indicating ‘serious failures’ and two were graded C4, indicating ‘very serious failings’”

While the problems include poor management, the fact is that HRAs were underfunded from the outset of the ‘self-financing’ system introduced in 2012. The financial position has deteriorated since then. That’s why one of the demands of Securing the Future of Council Housing is for reopening the 2012 ‘debt settlement’ – essentially calling for some debt write-off. (More than a billion pounds a year goes on debt service charges.)

Rather than proposing to increase the financial pressure on tenants with above-inflation rent increases, councils should be seeking the support of tenants in a campaign for the government to fund HRAs sufficiently to maintain and improve existing homes.

Even the New Labour government, which had a terrible housing policy (it opposed councils building council homes and prevented them from even applying for social housing grants until the Great Crash of 2007-08), provided funding through the Major Repairs Allowance, which modernised homes with double glazing, central heating and UPVC doors.

With more demands on councils, an upgraded Decent Homes Standard due and decarbonising housing urgently needed, this government needs to provide its equivalent of the Major Repairs Allowance.

Martin Wicks, secretary, Labour Campaign for Council Housing