Council warns over condition of homes amid £1.8bn HRA shortfall

Una O’Halloran, executive member for homes and neighbourhoods at Islington Council, said: “The Department for Levelling Up, Housing and Communities introduced measures in recent years to reduce and cap the amount that renters pay, meaning the revenue that councils receive does not keep up with inflation. 

“This inevitably means that Housing Revenue Accounts for councils across the country have seen a reduction in expected income, which reduces our ability to carry out important investment and maintenance work, including tackling damp and mould and keeping homes in good condition.

“We will continue to lobby the government for a mechanism to recover this money so that we have the resources required to provide our tenants with decent, high-quality homes.”

In the document, Islington Council identified “significant overspends/budget gaps” as a risk.

It said this is because of high and sustained inflationary pressures on budgets (particularly social care costs), rising demand for council services and uncertainty around local government funding.

The council said that the wider economic context remains “very challenging for local authorities in London and beyond”.

Islington Council has agreed a “balanced budget” for 2024-25 that includes savings of £10.8m, and £17.8m in total over the medium term.

The estimated net budget gap for 2025-26 is approximately £31m and around £25m for 2026-27.

“A savings programme is in development to meet these significant challenges and to build up the reserve position to enhance financial resilience,” the council said.

Development slowdown

Islington Council also warned that its plans to develop 750 new affordable homes could be affected. 

The authority pointed to the financial climate, including interest rates and inflation, regulatory standards increasing construction costs and a continued lack of funding to support new housing delivery.

Other reasons given included impacts from the new building safety regulations and lack of contractor “resilience”.

The council said: “The ambition to build 750 new council homes to be started on site before December 2027 was set in October 2021 based on the data and insight available at the time.

“Since then, there have been significant changes in the delivery environment. Wider events affecting the national economy, as well as regulatory changes, are likely to impact our ability to commence the construction of 750 new council homes by the end of 2027.”

Islington Council conducted a strategic review of its existing pipeline of affordable homes in 2023.

The outcome of this was a decision to stop some schemes that “offered poor value for money, and which presented the highest level of risk in terms of their deliverability”, the council said.

Islington Council said that to support the effective delivery of the revised programme, the structure of its new build team will be reviewed to ensure the “right skills and capacity” within the team.

It said the governance arrangements in relation to the programme have been “further strengthened through introduction of key decision points known as gateways”.

“Any decision to proceed will be dependent upon the agreement of the business case and viability appraisal of the scheme and clear evidence that all known risks have been either addressed or appropriately mitigated,” the council said.

‘Significant’ legislative and regulatory changes

Elsewhere, Islington Council said that “significant” legislative and regulatory changes are putting pressure on councils to invest resources and adapt ways of working to achieve compliance.

These include new inspection regimes on building safety and for social housing as well as new statutory requirements on public sector procurement.

“Councils are having to navigate a more complex compliance environment and need to ensure that there are adequate resources and skills in place to manage these challenges,” Islington Council said.