The crisis in Council Housing

Local Authority Council Housing is in a dire situation, but most people are unaware of the seriousness of the problems.

You will often hear the term ‘Housing Crisis’ which is shorthand for a complex range of deep-seated issues covering: homelessness, poor conditions, increasingly unaffordable rents, the growth in house prices versus average incomes, demographic pressures and a shortage of social housing. The solutions to these problems are not straightforward but most commentators agree that we urgently need to build more affordable housing and in particular more Council Housing. So why don’t we just do this?

The start of this crisis goes back to 2012 when many Councils took on significant government debt in order to own their housing stock and in return the government agreed that local authorities could keep all their rental income. So in theory it was like taking on a mortgage and in the long run paying off the mortgage and owning your own home.

Unfortunately, the government reneged on the implied agreement that rents would be used to pay off the loans as they then started to require Councils to fix or reduce their rents and this happened over a period of many years. This is like taking on a mortgage and then being told you can’t increase your salary even while all other costs are increasing.

This was good news for Council tenants but was effectively central government funding rent controls by putting local Councils in an unsustainable financial position.

Another major issue is the complex set of rules and regulations that have been developed to ensure that Council Housing is not cross subsidised. So the rental income from Council houses has to pay for repairs and maintenance, the implementation of all regulations relating to health and safety, the decarbonisation of housing stock, the negative impact of the right to buy scheme, the servicing of the huge debt discussed above and the building of all new Council Houses!

Imagine telling residents in a private housing estate that they had to invest in a new housing estate in another part of the district and by the way they probably wouldn’t get any return on their investment for at least a decade. 

The current situation for many Councils is bleak. There are rightly huge pressures to improve the Council Housing stock, to insulate the homes and to build high quality new homes. However, most Councils are servicing a massive debt that effectively can never be paid back.