‘Frightening’: Hackney renews pleas for housing aid as two thirds of councils fear budget collapse

Housing chief Cllr Clayeon McKenzie said the current system was ‘unsustainable’. Photograph: Hackney Council

The Town Hall has reignited demands for government help amid “frightening” pressure on its housing budget –  as two thirds of local authorities fear a financial collapse.

Earlier this week, a survey carried out by Southwark Council revealed 67 per cent of local authorities say they may be unable to balance their housing revenue accounts (HRA) by the next general election, while nearly half had resorted to using emergency funds to cover day-to-day spending.

The research follows a report from the same council last September, urging the government to protect social housing by injecting more money and changing a ‘broken’ financial model.

Hackney’s housing chief, Cllr Clayeon McKenzie, told the Citizen the survey results came as no shock, and deemed the current system “unsustainable”.

“It mirrors the situation we are facing with our HRA budget in trying to manage, maintain and improve our homes for everyone living in them,” he said.

“We are one of the largest social landlords, and with no additional money outside of the HRA to repair and enhance our homes, the increased costs we are facing on top of additional regulation means the people who will continue to suffer are those in our homes.

“We are working hard to provide decent homes for our residents – but years of chronic under investment in social housing have led to this perfect storm. Housing underpins so many things in our communities – health, education and families.”

Hackney was actively involved in creating last year’s report, and took part in the recent survey.

Its stark findings show roughly a third (28 per cent) of councils expect to sell off existing social homes to make ends meet, while 71 per cent expect to cancel, pause or delay current projects due to financial strain.

HRAs are ring-fenced accounts used by local governments to manage finances of existing housing stock. In the past, the main income stream for councils was a combination of social rents and central government subsidies.

A different ‘self-financing’ system was introduced in 2012, which the report states forced councils to take on a share of historic housing debt and “£18.5bn of debt moved between councils and central government on a single day”.

Local authorities have also made clear that years of mandatory rent cuts saw a collective revenue shortfall of £2.4billion between 2016-2020, estimated to reach £40 billion by 2040.

Meanwhile, rising inflation and regulatory burdens not accounted for in the 2012 settlement have caused even more strain, the report adds.

In July, the Town Hall joined the chorus of 109 councils urging the government to “save” social housing by agreeing a new model for the HRA, making long-term capital investment in retrofitting existing stock, and injecting enough cash to “reflect the real cost of building”.

But Hackney’s local opposition said the government can and should go further than these demands in order to address the national housing crisis.

While backing calls for more capital investment to retrofit and modernise England’s housing stock, the Green group argued that authorities like Hackney were hamstrung by the Labour government’s own political choices.

Cllr Zoë Garbett, co-leader of the Green group, told the Citizen: “Local councils require a sustainable local government funding settlement and increased revenue raising powers.

“As the sixth-largest economy in the world, the UK has the money if our political leaders have the will to act.

“Labour nationally are governing with made-up fiscal rules, which they could easily adjust to allow councils to build, buy back and fix up council homes.”

Cllr Garbett argued that this could be achieved through a tax of one per cent on individual taxpayers with more than £10 million in assets and two per cent for those over £1bn.

“We hope Labour councillors will support our wealth tax motion at next week’s full council, because without real investment in council housing, we will continue losing money hand over fist on temporary accommodation for thousands of families who need proper quality housing.”

Hackney’s Conservatives were also approached for comment.