New report reveals scale of housing budget pressure faced by councils

15 May 2025

Written by: Lambeth Council

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A new report from London Councils has laid bare the financial crisis looming over local authority housing services, with boroughs across the capital facing a £264 million shortfall over the next three years. The report, ‘Crunch Point for London Council Housing Finances’, warns that without urgent government intervention, council housing budgets will collapse under the weight of spiralling costs and years of constrained income.

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New report reveals scale of housing budget pressure faced by councils

As the second, largest local authority landlord in London, Lambeth, which owns and manages over 23,000 social rented homes and 10,000 leasehold properties, is among those sounding the alarm and has called for a fairer system that reflects the real cost of managing social housing in the capital.  With an ageing housing stock, more than 30,000 households on the housing register and 4,700 families in temporary accommodation, Lambeth is at the forefront of the national housing crisis.

“Council housing is a lifeline for thousands of Lambeth residents—but we are reaching breaking point,” said Cllr Danny Adilypour, Deputy Leader of Lambeth Council and Cabinet Member for Housing, Investment and New Homes.

“We are being forced to make impossible choices between maintaining ageing homes, building new ones, and balancing the books.”

Ahead of the government confirming future social rent levels, London Councils’ analysis shows that London boroughs are grappling with the growing cost of managing social housing at the same time as income has been constrained by years of national rent control policies. Despite rising inflation and ageing housing stock requiring more maintenance, social rent increases have been capped below inflation, severely impacting councils’ ability to balance their Housing Revenue Accounts (HRAs).

The London Councils’ report shows that the costs of managing council housing have risen sharply, while national policy has kept social rent increases below inflation for many years, eroding income. In London, where construction and maintenance costs are higher than anywhere else in the country, the consequences have been particularly severe.

“The current model for funding social housing, imposed on us by earlier governments, is no longer sustainable. Rent controls, persistent high inflation, the loss of housing stock through Right to Buy, and the introduction of new regulatory requirements mean we can no longer operate within the confines of this regime” added Cllr Adilypour.

“Councils are facing unsustainable debt levels – and there is simply not enough money in the system to allow council housing to be run properly.”

The report recommends a series of changes to rent and funding policies that will enable local councils to invest in improving existing homes and building new affordable homes for those who need it. The asks include a longer-term settlement for rent policy and action from government to reduce historic debts in recognition of the impact of previous central government policies on local council housing budgets.