Islington warns of ‘unsustainable’ housing strategy as two in three councils fear ‘collapse’

Andover Estate, where a number of new homes are set for completion this year. Image: Google

Islington Council has warned that its housing investment is unsustainable and called for more government support, after a survey revealed that two thirds of local authorities fear budgets are on the verge of “collapse”.

Last week, a study by Southwark Council into 109 local authorities showed that 67 per cent believe it may be impossible for them to balance their housing revenue accounts (HRA) by the next general election.

Nearly 50 per cent said they were dipping into their emergency funding to keep day-to-day spending afloat.

Though Islington stresses it has managed to boost its reserves, a council spokesperson cautioned that “the volatility of funding for council homes had damaged the council’s ability to invest sufficiently”.

Islington was one of the first 20 councils to sponsor the research into Southwark’s ‘Securing the Future of Social Housing’ report, released last September.

The study called on the government to step in by revamping the “broken” financial model for social housing and free up more cash for local governments.

When serving as the borough’s housing chief in August, Islington Council leader Una O’Halloran blamed the council’s forecast £1.8 billion HRA shortfall over the next 30 years on government rent caps.

She repeated calls for a “new, fair and sustainable HRA model so we can properly maintain and improve council housing and build new council homes”.

The borough’s current difficulties revolved around the “certainty of rent policy”, the spokesperson added, and the council was also struggling with uncertainty around future capital grants for housing.

“We have had to adapt our investment programme to being significantly underfunded and prioritise building safety, delivery of essential services and major component renewal in order to address these important essentials,” they said.

“This approach is leading to significant disinvestment in our stock, and doesn’t meet the expectations of our residents, our own aspirations or the standards required by the Regulator of Social Housing.”

The findings also include the stark statistic that roughly a third (28 per cent) of councils expect to sell off existing social homes to make ends meet, while 71 per cent anticipate having to cancel, pause or delay current projects due to financial strain.

However, the council confirmed that none of its planned projects, such as the Andover Estate and Beaumount Rise developments, are in doubt.

HRAs work by ring-fencing local government funding for the financial management of housing stock.

While in the past most of the revenue for these pots came from both social rent and government subsidy, reforms to the system in 2012 had forced councils to take on a share of historic housing debt, the report claims.

Mandatory social rent cuts had also seen a total revenue shortfall of £2.4 billion for local authorities between 2016-2020. This was forecast to reach £40 billion by 2040, the report adds.

The government is tipped to introduce a new multi-year settlement for local government in 2026, in a bid to bring down the number of funding pots “so that councils have more certainty and flexibility to judge local priorities”.

While Islington said it expected this would alleviate the HRA deficit, it warned that “our investment gap is still considerable”.