London Council Housing in Crisis?

Talk about housing in London and you will hear about the cost of rent and an unaffordable property ladder. For so long the safety net for those unable to afford to rent or buy has been London council housing. But now council housing in London is in crisis, according to one housing advisor at Barking and Dagenham Council in a recent BBC documentary, as ‘applicants face a 50-year waiting list’, whilst there are not enough affordable homes or council houses being built to meet demand.

In February this year the Government’s Homes and Communities Agency (HCA) reported there were 401,470 council-owned properties across London’s thirty-three local authorities, and six of these boroughs (Camden, Greenwich, Hackney, Islington, Lambeth and Southwark) account for 39% of London’s council housing stock.

However, as London’s economy and population both continue to grow well above national averages, housebuilding is not keeping up with demand. London Councils state that in the last ten years there has been an increase of 540,000 households in London but only 430,000 new homes built. And councils’ stock is not growing with demand, in fact stock for some boroughs has been shrinking at an alarming rate. A BBC documentary claimed that the London Borough of Barking and Dagenham has lost 50% of its stock since the 1980’s mainly because of Right to Buy. As council stock has been eroded and not replaced, demand has outstripped supply, a story that resonates around the capital, and which is true across all types of housing in London. As a result prices rise and have become unaffordable for the majority. A prime example of this is Barking and Dagenham. The council often appears high up on national lists of deprivation, yet the average price of a property within the borough is £270,000. To put this into context, the council leader, Darren Rodwell, said he can no longer afford a property in the borough.

The Impact of Universal Credit

Councils are also being affected by welfare reform as are their residents, one of the biggest impacts is Universal Credit (UC). In a Direct Payment Demonstration Project London’s Southwark Council calculated that councils will incur an additional cost of £1.2m per year for every 20,000 tenants of working age on Housing Benefit. What’s more research by the National Federation of ALMOs (NFA) showed that 89% of UC claimants in social housing had fallen into rent arrears, compared with 31% of all social tenants. So UC will cost them more to collect and arrears are set to grow.

There is now extra pressure on councils and their financial inclusion teams to advise and help residents ensure they claim what they are entitled to, as well as using sources of additional income, from Central Government, offered to local councils to help bridge shortfalls, such as Discretionary Housing Payments (DHPs). With both councils and residents affected, many are looking to try and help the most vulnerable in their boroughs. Earlier in 2016 Croydon Council relaunched a council supported community bank as a safe and cost effective alternative to pay day loan companies. However, it is services like this that are being put at risk by squeezes on income and funding. As between 2010/11 and 2013/14 Council Tax charges in London fell on average by around £100, or 10% in real terms, coupled with the 1% rent cut imposed by Central Government.

This perfect storm means councils must pick and choose what services they can offer their tenants. With all wanting to improve their residents’ lives, such as moving those currently out of work into employment, creating safer communities and so forth. To be able to offer such services councils now need to be as lean and efficient as possible. Many councils are turning to technology to embed efficiencies, for example eight councils in the capital have invested in Mobysoft’s Rentsense solution. This predictive analytical application helps landlords embed FTE efficiencies, improve workload for income officers, increase collection rates and reduce arrears whilst protecting revenue streams. All this at a time when rent payments are under increasing pressure from welfare reform and stretched resources, indeed Mobysoft estimates that the combined rent arrears figures for the thirty-three London Boroughs is circa £85m.

With the housing crisis in London looking set to deepen councils need to be the safety net in society to help the most vulnerable and those who cannot afford to rent or buy in the private sector. This means they need to be able to protect services and they cannot do this without first protecting revenues.