Lambeth council has asked the government for a £40 million bailout to balance its books.
The Ministry of Housing, Communities and Local Government (MHCLG) has yet to respond to Lambeth Council’s request regarding its Housing Revenue Account (HRA).
But without at least £40 million in financial support the Labour-run local authority says it will be unable to set a balanced HRA budget from April this year. The HRA records the costs and income associated with running a council’s housing stock. It is a ringfenced funding pot separate from the rest of a council’s finances and it must not operate at a loss.
A report on Lambeth’s HRA set to go before the council’s Cabinet next Monday (January 27) says that financial assistance requested from the government is ‘critical’ to enable the HRA to be balanced from April. The council has asked for support through an accounting trick known as a ‘capitalisation direction’, which allows the local authority to treat short-term revenue costs as capital investment costs.
Lambeth faces a £1 billion black hole in its HRA account over the next 30 years. The report blames the shortfall on the previous Conservative government’s council rents reduction policy from 2016 and a seven per cent council rent rise cap in 2023.
The report continues: “Successive governments have placed considerable additional regulatory requirements on social landlords for building and fire safety, without the funding to cover the costs of these additional requirements.
“These requirements disproportionately affect boroughs such as Lambeth, with higher levels of high-rise blocks and will cost the council £76 million from 2018 to 2028. Previous government decisions to remove funding on the Decent Homes Standard means that we have had little funding to invest in our ageing stock as its condition worsens.”
Next Monday (January 27), Lambeth’s Labour Cabinet is set to approve a 2.7 per cent rise in council rents from April 2025. The average council rent will increase by £3.60 per week (£14.40 per month) to £137.10 per week (£548.40 per month).
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The report says an additional £4.2 million will be raised for the HRA by the rent rise. Service charges will reduce by 76p per week and heating and hot water charges will decrease by £1.04 per week. The reductions are a result of the council now recovering a shortfall in service charges and energy costs that it accumulated two years ago, according to the report.
Lambeth is the second largest council landlord in London after Southwark, with 23,600 homes, as well as 10,000 leasehold properties.
Cllr Danny Adilypour, Deputy Leader of the council, described the financial outlook of the council’s HRA account as ‘stark’. He said: “Short-term decisions by the previous government have taken £1 billion out of our HRA over the next 30 years, seriously limiting the amount of money we have to maintain our estates.
“The council is committed to making sure council housing is up to as high a standard as possible, is repaired promptly when needed and meets the needs of residents. But we’ve been working with one arm tied behind our backs.
“The previous government imposed caps and limits on our rental income, but without providing extra funding to make up the gap, which of course means there’s not enough money available to do all of the work on our estates that we know we need to.
“We’ve also been asked to do lots of extra work – without any additional money to fund it. Housing in Lambeth is ageing and needs investment, with most of our council homes being flats that are on average more than 60 years old. It’s a really difficult situation which is why we have been working closely with the new government to find a way forward.”
