Councils are having to “make impossible decisions” between building new homes and repairing old ones due to increasing financial pressure, undermining the government’s housebuilding targets, according to a survey of local authorities.
The Local Government Association (LGA) found that less than half (38%) of councils were confident they would be able to invest in planned new-build housing programmes, even after raising social housing rents.
At the same time, 57% were planning to cut spending on repairs and maintenance, and more than two-thirds were planning to cut spending on supervision and management of their housing stock.
Adam Hug, the housing spokesperson for the LGA, said: “The stark truth is that the existing level of funding means councils are having to make impossible decisions about maintaining existing housing stock and building more homes that the country seriously needs.”
The survey of more than 100 local authorities found many councils were also having to choose between running their council housing fund into deficit or failing to meet legal repair obligations. This includes new requirements under Awaab’s Law, requiring landlords to address health and safety issues in a specific timeframe.
The survey found that council housing rents across the country are to increase, but fewer councils have the funds to invest in new housing developments, which may hamper government plans to build 1.5m homes over the next five years.
Grace Williams, leader of Waltham Forest council and executive member for housing and regeneration at London Councils, said local authorities were facing a “black hole in our social housing finances”.
“In Waltham Forest, we were the fourth largest council home builder in 2024, but like other local authorities, we’re finding it harder to balance those two responsibilities [of building and maintaining],” she said.
“For the next five years, we’re using £165m to invest in our current housing stock for improvements and safety. But we need to build more homes for people who are in housing need.
“The numbers are just going up, and it’s difficult, because we need both things.”
She said it was “refreshing” to have a government talking about building housing but that councils need more investment if they’re going to help deliver it.
The LGA found that of those councils with a Housing Revenue Account (HRA), 72% said they were very or fairly likely to draw on reserves to balance their budget for 2025/26. An HRA is a ringfenced budget funded by council housing rent to be spent on housing maintenance and housebuilding.
London Councils forecasted that boroughs will have to cut £264m from their social housing spending over the next four years to avoid their HRAs becoming insolvent.
In September, an “unprecedented coalition” of councils in England called for an emergency injection of £644m from the government to stabilise their housing accounts and prevent investment in new homes being delayed or cancelled.
The government is consulting on a five-year rent settlement for social housing, but many local authorities said it was not enough – just over half of respondents said they were confident this settlement would allow them to balance their budgets.
The LGA called on the government to instead plan a 10-year rent settlement, and use the upcoming spending review to announce extra funding.
“While many councils see a proposed five-year settlement as a step in the right direction, there are concerns this is not long enough to give them the certainty they need to ramp up their new-build housing programmes,” said Hug.
“The situation is untenable and unsustainable, and without urgent action, councils – and the communities and people they support – will be severely impacted.”
A spokesperson for the Ministry of Housing, Communities and Local Government said: “We understand the financial pressures councils are facing and we are determined to fix the foundations of the sector so we can deliver the biggest boost in social and affordable housebuilding in a generation.
“That’s why, despite the inheritance we have been left, we’re giving councils £500m to help them deliver homes for families at risk of homelessness, and injecting an additional £800m into the Affordable Homes Programme to deliver thousands of new social and affordable homes.”
