London Councils warns of ‘crunch point’ as boroughs face having to cut council housing spending by £264m over three years

London boroughs will have to reduce their spending on council housing by £264m over the next three years to avoid their Housing Revenue Accounts (HRAs) going bust, the London Councils group has claimed.

The warning came in a report, Crunch point for London council housing finances, which calls on the Government to take action to stabilise the social housing sector ahead of the confirmation of future social rent levels.

The report suggests boroughs’ costs of managing their council housing have “spiralled while income has failed to keep pace”, after many years of national policy limiting social rent increases below inflation.

It also suggests boroughs are “not in a position to maintain spending in real terms” on their council housing stock, despite the “urgent need for investment”.

The report highlights that:

• London local authorities own and let around 390,000 social homes – housing more than one in 10 London households.
• The capital contains a greater proportion of costly to maintain tower blocks and other forms of high-density council housing compared to the rest of the country, which means London’s local authorities are particularly affected by national policy on social rent failing to deliver funding.

The report claims that five boroughs could completely exhaust their HRA reserves before 2027/28. 

London Councils said its top priority is a return to social rent convergence, which the Government implemented between 2002 and 2015.

This established a national rent formula aimed at ensuring social housing tenants pay similar rents for similar properties, taking into account local incomes and property values.

The report points out that rent convergence helped raise social rents and better reflected the costs of managing the capital’s social housing stock.

London Councils is pushing for a 10-year settlement with rent increases tagged to CPI+1%, alongside action to reduce local authorities’ HRA debts in recognition of the contribution government policy has made to driving up debt levels.

These requests mirror those made by the G15 group in January 2025, who said the new policies would unlock an additional £3.5 billion for the sector over the next 10 years.

Cllr Grace Williams, London Councils’ Executive Member for Housing & Regeneration, said: “We have reached crunch point for London’s council housing finances.

“Boroughs are frustrated that at a time when we want to invest in our council housing and build new social homes, the grim reality is that many will need to make deep cutbacks. We are dealing with fast-rising costs but also the legacy of years of government underinvestment and budget squeezes.”

Cllr Williams added: “Boroughs play an essential role in modernising older properties and building the new affordable homes Londoners are crying out for. A better future for London’s council housing is possible but it requires national policy decisions that give us secure and sustainable finances. We remain committed to working with the government on our shared ambitions for council housing.” 

Harry Rodd