Councils in Crisis: The Impossible Choice Between Building and Repairing Homes

In what local government leaders are calling an "untenable and unsustainable" situation, councils across England are facing a stark dilemma: should they invest in building desperately needed new homes or channel scarce resources into repairing their aging and often unsafe existing housing stock?

A new survey conducted by the Local Government Association (LGA) highlights the severity of the crisis engulfing local authorities, as they struggle with escalating costs, statutory obligations, and limited central government support. The result is an increasingly paralysed housing strategy that threatens to derail the UK’s ambitious plans to build 1.5 million new homes over the next five years.

Funding Shortfall Puts Councils on the Brink

The LGA survey, which gathered responses from over 100 local authorities, found that only 38% felt confident they could continue investing in new-build housing programmes—even after raising social housing rents. Meanwhile, more than half (57%) reported that they were planning to reduce spending on repairs and maintenance, while two-thirds expected cuts to the supervision and management of existing housing stock.

Adam Hug, the LGA’s housing spokesperson, described the current funding landscape in stark terms:

"The existing level of funding means councils are having to make impossible decisions about maintaining existing housing stock and building more homes that the country seriously needs."

This balancing act is no longer sustainable. Councils are being forced into impossible positions, including running their Housing Revenue Accounts (HRAs) into deficit or failing to meet legal obligations related to tenant safety and housing conditions.

Legal Pressures and “Awaab’s Law”

Adding to the burden is the implementation of new legislation such as Awaab’s Law, which mandates landlords to address health and safety concerns—like damp and mould—within strict timelines. While these legal measures aim to protect tenants, they come with a hefty cost burden that many councils are struggling to meet.

Failing to comply can expose local authorities to legal action and reputational damage. Yet complying without adequate funding may jeopardize future investment in new housing.

Case in Point: Waltham Forest

Grace Williams, leader of Waltham Forest Council and London Councils’ executive member for housing and regeneration, shared firsthand how these pressures are playing out on the ground.

"In Waltham Forest, we were the fourth largest council home builder in 2024, but like other local authorities, we’re finding it harder to balance those two responsibilities."

The council has committed £165 million over the next five years to improve and ensure the safety of its current stock. However, Williams noted that this commitment leaves little room for new development—even as the waiting list for housing continues to grow.

"The numbers are just going up, and it’s difficult, because we need both things."

A Shrinking Path for New Housing

The LGA also found that 72% of councils with an HRA are likely to draw on their reserves to balance their housing budgets for the 2025/26 financial year. These reserves were not designed to sustain long-term deficits, and many councils warn that such a course is only viable in the very short term.

London Councils has forecast that boroughs will have to slash £264 million from social housing budgets over the next four years to avoid insolvency of their HRAs—a move that could spell the end of new council-led developments unless emergency funding is secured.

Calls for Emergency Support

The sector has not stayed silent. In September 2024, an unprecedented coalition of councils called on the government to inject £644 million into council housing finances to prevent widespread collapse of development projects and repair works.

The government has proposed a five-year rent settlement for social housing, but only just over half of councils surveyed said they believed this would be sufficient to balance their budgets. The LGA has instead called for a 10-year settlement, combined with a new national funding strategy that prioritises stability and long-term planning.

"While many councils see a proposed five-year settlement as a step in the right direction, there are concerns this is not long enough to give them the certainty they need to ramp up their new-build housing programmes," said Hug.

Central Government’s Response

A spokesperson for the Ministry of Housing, Communities and Local Government said the government is committed to resolving the crisis:

"We understand the financial pressures councils are facing and we are determined to fix the foundations of the sector so we can deliver the biggest boost in social and affordable housebuilding in a generation."

The government has announced £500 million in funding to help councils house families at risk of homelessness and a further £800 million will be channelled into the Affordable Homes Programme to support the development of new social and affordable housing.

While these steps are welcome, local authorities argue they fall short of what’s required, especially when spread over multiple years and across hundreds of councils.

The Bigger Picture: What’s at Stake?

The consequences of inaction are serious. Social housing waiting lists are growing, and thousands of families continue to live in substandard or temporary accommodation. In many regions, housing affordability is spiralling out of reach, while homelessness continues to rise.

Moreover, failing to build now may prove costlier in the long term. Delays mean higher future construction costs, greater strain on emergency housing services, and a lost opportunity to stimulate economic growth through public-sector-led construction.

There’s also the issue of climate resilience. Many council-owned homes were built decades ago and require retrofitting to meet modern environmental standards. Without adequate investment, councils will struggle to contribute meaningfully to the UK's net-zero targets.

A Fork in the Road

Local government leaders and housing campaigners agree on one thing: the current model is broken. Without urgent reform and sustained financial support from central government, councils cannot fulfill their dual role as stewards of existing homes and pioneers of new housing developments.

"The situation is unsustainable," concluded Hug. "Without urgent action, councils—and the communities and people they support—will be severely impacted."

Final Thoughts: Reimagining the Role of Local Authorities

The story unfolding across England’s councils isn’t just about budget lines or housing stats—it’s about people. It’s about families stuck in temporary accommodation, elderly residents living in unsafe homes, and generations locked out of secure housing due to systemic underfunding.

As the UK sets its sights on ambitious national housing targets, the role of councils must be reimagined—not as overstretched landlords caught in a financial vice, but as empowered agents of housing transformation. That vision can only be realised with proper backing, honest collaboration, and political will.