Council house improvements at risk due to ‘broken’ funding system, authority warns

12/07/24

Mid Suffolk District Council has warned progress on improving its council homes is under threat

Mid Suffolk District Council has warned progress on improving its council homes is under threat due to serious challenges caused by a ‘broken’ national funding model.

A report to be discussed by the council’s cabinet on Monday, 15 July, details how the authority will have to use £3.7million from reserves to balance its housing budget.

This has led to “serious concerns” about how it will sustain its investment in council homes in future years.

The council is urging the new Government to review funding for the sector, with many other housing providers facing similar challenges.

It echoes calls made today by a national coalition of council landlords who have raised the alarm about the capacity and confidence of the social housing sector as a result of the broken financial model. They have written an open letter to Deputy Prime Minister Angela Rayner.

Cllr Richard Winch, cabinet member for Housing and Property, said: “Our tenants are our priority. We want to be able to invest in new council properties, ensure our repairs and maintenance service is rapid and robust, and make our existing homes more energy efficient.

“We’ve made good progress in the last year to meets the needs of our tenants and improve the service we offer.

“However, all this positive work risks being derailed by a national funding system which is fundamentally broken.”

Local housing authorities like Mid Suffolk are required to have a separate, ringfenced Housing Revenue Account (HRA) to fund their council homes.
In 2012, there were national changes to the way these accounts work. Councils had to take out a loan to buy their own properties, creating a significant amount of debt to be self-financed through rental income. At the time, rents provided councils with enough money to start repaying the debt and continue investing.

However, the Government later restricted rent rises. These were welcome support for tenants, but there was no additional income for housing authorities to maintain investment.

In 2023/24, there was a £3.7m shortfall in Mid Suffolk’s housing budget. This included additional costs from service improvements, clearing a repairs backlog which had built up over several years, and a recalculation and reporting of loan charges.

The report to be discussed by the cabinet says that without action to tackle the financial issues, the HRA could fall below the minimum working balance of £1m in two years.

Cllr Winch said: “While we can use reserves now, this is unsustainable.

“We are expected to improve the standard of council housing, improve insultation and build new homes, but it is getting increasingly difficult within these financial constraints.

“Fundamental change is needed on a national level so Mid Suffolk and other authorities can deliver the homes our tenants need now and in the future.”

All other council services, such as refuse and recycling, grants, planning and leisure, are paid for by the council’s General Fund, which has substantial reserves. These funds cannot be used for council housing under Government rules, even though the council could comfortably afford to do this.

Cllr Winch added: “Our General Fund is really healthy and we have money to invest in great projects such as the proposed £1.5million fund to enhance Stowmarket town centre and new sporting facilities in the town.”

The cabinet will be asked to approve the use of £3.7m to balance the housing account.