Latest Public Sector News

21.07.15

Cuts to social housing rents will end up costing councils £2.6bn – LGA

Government proposals to cut rents paid by social housing tenants by 1% a year will cost councils £2.6bn by the end of this government, new analysis by the LGA has revealed.

The reduction, effective from 2016 and last for four years, would in effect increase councils’ costs by £234m in the first year to over £1bn by 2019-20.

By that point the funding gap – of £1bn per year from 2020 onwards – would represent 60% of local government’s total housing maintenance budget. The surplus spent by councils would equate to the cost of building almost 19,000 new homes.

Conservative Cllr Gary Porter, LGA chair, said: “There are millions of people on social housing waiting lists and councils want to get on with the job of building the new homes that people in their areas desperately need, which is the best way to reduce the housing benefit bill and boost growth.

“It is therefore vital that these costs are considered by the government as part of the wider debate of council funding to avoid the capacity of councils and housing associations to invest in this much-needed housing being put at risk.”

Since around 70% of council tenants receive housing benefit, possible rent decreases would not impact them directly – instead affecting the budget from the Department for Work & Pensions and leaving local councils to mend the additional financial gaps.

Cllr Porter added that councils should be able to retain all council home sale receipts of their own housing stock locally. He also argued they should take a lead role in housebuilding by lifting housing borrowing limits, therefore being able to invest in new housing. The LGA also called for powers to set Right to Buy discounts.

“If we are to see the crucially needed numbers of homes built, councils must have a lead role in housebuilding and be allowed to reinvest in the homes and infrastructure that they are best placed to help deliver.

“Local authorities could build half a million new homes and transform the lives of hundreds of thousands of families if given greater powers, resources and flexibility,” he added.

The LGA supports efforts to keep rents low but warns the decision would “hold back councils from helping government build more homes, boost growth and employment and reduce the welfare bill”.

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