Lambeth goes cap in hand to government in bid to plug housing revenue shortfall

Lambeth council has asked the government for a £40million bailout to balance its books.

The Ministry of Housing, Communities and Local Government (MHCLG) has yet to respond to the local authority’s request regarding its Housing Revenue Account (HRA).

But without at least £40million 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 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.

On Monday, Lambeth’s Labour cabinet is also expected 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).

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.

In December 2024, 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.”

Pictured top: Cllr Danial Adilypour, deputy leader of Lambeth council (Picture: Lambeth council)