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New housing plans at London council put at risk by £13.8m budget deficit
Southwark Council has suffered a setback in its plans to build 11,000 new council homes over the next two decades, after it emerged that its housing budget is forecast for a £13.8m deficit.
A report brought to council leaders this month highlighted how rising inflation and interest rate increases had “started to take their toll” on Southwark’s Housing Revenue Account (HRA).
The HRA is the budget used by the council to manage its housing stock and build new homes. Government legislation requires the HRA to be primarily self-funded through social rent, leaseholder charges and borrowing.
The overspend is also attributed to extra costs from new fire safety requirements and lost income from the government’s cap on social rent.
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The report outlines how the deficit will limit the council’s ability to deliver its pledge of 11,000 new council homes by 2043.
Even the homes that Southwark has already committed to will now be “under constant review” and “subject to the test of affordability”.
Stephanie Cryan, cabinet member for homes, communities and finance at Southwark, said: “It has never been harder for local authorities to balance their books; to carefully divide our precious resources to the highest priorities – in line with what residents need and want most.
“Like councils across the country, Southwark’s housing budget is under significant financial pressure with a widening funding gap, caused by both government policy and the current economic climate, and we find ourselves having to do more with less each year – this coming year is no exception.
“That’s why we’re looking towards the future, developing a refreshed set of governance and proposals to make sure we can afford what we set out to do for people, now and in the years to come.”
The report said that future so-called “uncommitted” building projects “cannot be contained within the affordability envelope”.
“The council will endeavour to introduce these to the committed programme as and when funding and affordability allow,” it said.
Victor Chamberlain, leader of the council’s Liberal Democrats, said: “With Southwark’s housing budget on a knife edge, Labour have finally been forced to confirm that they cannot meet their commitments on new houses.
“The difficulties imposed by external factors are clear, but that means it’s all the more important for Southwark Labour to get a grip on their finances and ensure residents see value for money.
“Residents dealing with the disrepair crisis in our council homes and [who] cannot afford a new home will be shocked to see this huge overspend.”
In July, the Housing Ombudsman made two severe maladministration findings for Southwark after the council falsely accused a tenant of vandalising his home and denied him a mutual exchange.
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