CIH submission to the APPG inquiry into the barriers to delivering council housing

Our members working in local authorities are clear that they want to support housebuilding and tackle homelessness, to ensure everyone has a safe and affordable place to call home. The government has an ambition for a “council housing revolution”, as part of a significant boost to social and affordable housing. This ambition has been backed by the £39 billion Social and Affordable Homes Programme, financial certainty with the social rent settlement including rent convergence, and policy stability with announcements on the Decent Homes Programme and Future Homes Standard. 

However, it is clear that local authorities are facing a complex environment with competing priorities, which impacts their capacity for housebuilding. This is due to a variety of barriers:

• Financial constraints
• Right to buy impacts and legacy
• Local government reorganisation
• Skills and capacity shortages.

Financial constraints

Local authority finances have been under strain for a long time, with a combination rising costs, reduced income and policy changes that have impacted on their resources. In housing, this has led to a significant shift in the makeup of the sector. Many local authorities undertook stock transfers following the Housing Act 1988, which allowed homes to be transferred to housing associations. The Right to Buy, introduced in 1980 and considered in more detail below, also had a considerate impact on the supply of council homes. The UK Housing Review’s Autumn Briefing 2025 outlined the unsustainably increasing financial pressures on councils and Housing Revenue Accounts (HRAs), with reduced maintenance budgets and a decline of conditions of existing homes, which all act as “growing barriers for councils seeking to deliver new homes”.

There are also rising pressures on local authority General Fund budgets, as a significant proportion of funding is spent on temporary accommodation costs, which the Centre for Homelessness Impact found failed to provide value for money because money to prevent homelessness was being spent on expensive and often unsuitable temporary accommodation.

Most importantly, there is the build-up of unsustainable debt within HRAs which limits many councils’ ability to build. CIH outlined in a report in 2024 that previous assumptions about viable debt levels in the self-financing settlement are now outdated, restricting councils’ ability to operate in a financially sustainable way. In recently updated analysis by Shelter, HRA debt is shown to have risen to approximately £31.8 billion. This includes changes in rent levels (particularly four years of rent cuts), increases in Right to Buy sales, rising additional costs and major changes to the operating environment. The report makes the case for a clear path towards transferring this debt to central government, which would create significant headroom for councils to operate sustainably in the long-term, meeting requirements, fulfilling tenants’ needs, and building new council homes. Further information is included below under ‘Solutions’.

Competing priorities

As with the wider housing sector, local authorities are experiencing a strain on resources and funding with regard to investment decisions for existing and new homes. Recent policy announcements and regulatory changes such as Awaab’s Law, the new Decent Homes Standard and Minimum Energy Efficiency Standards (MEES) have led many councils to increase spending on investment in existing homes. This is also to ensure compliance with the regulatory requirements and inspections from the Regulator of Social Housing (RSH). This is essential to ensure that residents are living in safe, decent homes.

It has, however, had unintended consequences in the development of new homes. The stretched state of HRA finances (as outlined above) means that there is competition to do more with fewer resources. This has led to many in the housing sector delaying new developments to focus on existing home requirements and investment. The RSH’s Sector Risk Profile 2025 outlined the need to make “difficult trade-offs” within a challenging economic environment. Without additional funding for necessary investment in existing homes, this will continue to have impacts upon the numbers of homes that councils can build. CIH has suggested a new Decent Homes Programme to support this and free up capacity for development, as outlined by the Housing, Communities and Local Government Select Committee report.

Right to Buy impacts and legacy

We welcome the government’s recent changes to Right to Buy to ensure that the policy no longer impacts upon our supply of much-needed social homes. CIH has previously argued that Right to Buy was a “strategic failure”, exacerbating inequalities, as well as having significant impacts upon the supply of council homes. In fact, four in ten council homes sold through Right to Buy have ended up in the private rented sector, representing a failure in the aim of boosting affordable homeownership for council tenants. Additionally, until recently, use of the receipts from Right to Buy was restricted, meaning councils could not use all of them or combine them with grant, and therefore could not develop new council homes at the scale needed to replace those lost through the scheme.
The government has introduced changes to mitigate these impacts, both through policy announcements and legislation through the Social Housing Bill. These are welcomed and will ensure no further loss of council homes at the scale we have previously seen. In particular, the exemption of new build housing for 35 years means that councils are now incentivised to develop new homes, without the worry that these could soon be lost to Right to Buy.

Local government reorganisation

Local government reorganisation (LGR) is taking place in parts of England where the two-tier system of local government remains. In 2024, the government announced plans to abolish county councils and create new, larger unitary authorities to replace smaller districts and boroughs. The proposals were broadly welcomed across the housing and development sector as a way to provide greater accountability, achieve economies of scale, and align administrative and political geographies. However, it is clear that in the short-term LGR is having a significant impact on the operations of local authorities, potentially affecting service provision and long-term planning.

Feedback from our members has highlighted concerns about: 

• Changes to allocations policies and how to align these when mergers are occurring.
• Continuity of services including temporary accommodation and homelessness.
• The impact on local plans and delivery of new homes.
• Ensuring new authorities have everything in place to deliver services in a safe and legal way from day one.

Significant financial and staffing resources are currently being allocated to LGR. While the government has provided councils undergoing LGR with additional support, we are concerned that this may not be sufficient to address the scale of the challenge. As a result, there is a risk of local authorities concentrating their efforts on core, statutory activities, which may impact the delivery of new social homes.

Our members have highlighted the need for more guidance from government on LGR. We would particularly welcome more specific guidance on what policies and services are required to be in place in new authorities immediately following vesting day and which are expected to take some time to transition to the new geographies. We believe there are lessons to be learned from recent unitarisation in areas such as Somerset, North Yorkshire and Bournemouth, Christchurch and Poole, and encourage government to identify and share good practice from these cases.

Skills and capacity shortages

We have consistently shared concerns on the capacity of local authorities with regard to skills and staff resources. This is particularly evident in local authority planning teams, where vacancies and lack of specialist expertise cause are a serious issue. This has a knock-on effect on delivery of affordable housing, as Savills reported. Despite the government’s planning reforms, local authority capacity constraints continue to act as a bottleneck, slowing the rates of applications being approved.

Whilst many of the government’s planning reforms have been welcomed, the significant changes in planning policy and legislation have led to an ever-changing and complex environment for local authorities to navigate.

CIH and other sector representatives have been working to tackle these issues, for example feeding into the government’s roadmap for improving Section 106. However, the restrictions on local authority capacity can directly impact upon the number of new affordable homes delivered through Section 106 agreements. For example, often in late-stage viability negotiations, small local authority teams are challenging developers with significantly more legal representation to enforce affordable housing requirements in the Section 106 agreement.

Shelter has argued that local authorities must be empowered to challenge developers to deliver more social homes by boosting resource funding and setting percentage requirements of onsite delivery of social homes. CIH supported having a 20 per cent requirement of social homes in the latest National Planning Policy Framework consultation. Local authorities must feel equipped to have these negotiations and remove barriers to ensuring new affordable housing is delivered, in accordance with local housing need.

The impact of the limited capacity for social housebuilding is rising levels of housing unaffordability and homelessness. Councils play a pivotal role in supporting those in desperate housing need, and the lack of affordable housing options has led to high levels of households living in unsuitable temporary accommodation for long periods of time. This has also led to a significant financial strain on councils’ budgets, with the gap in temporary accommodation costs estimated to rise to £4 billion by 2029/30, according to the Local Government Association.

It is also important to highlight the positive impact of social and council housebuilding upon communities and wider society. The ‘Securing the Future of Council Housing’ campaign makes a clear case for council housing, which provides decent, secure homes for those who need them, help to prevent rough sleeping and homelessness, improve health and wellbeing outcomes, and provide stable foundations for children in education. Prime Minister Andy Burnham has highlighted the need for council housebuilding, understanding the crucial foundation and good start a secure home provides. This includes a pledge to “oversee the biggest council housebuilding programme since the postwar period”.

Building social rent homes is also beneficial for growth and the economy more broadly. Previous research from Shelter and the National Housing Federation showed that building 90,000 social rent homes would add £51.2 billion to the economy, due to the interlinks with employment, healthcare, crime, homelessness and education. This is also supported by recent evidence from the G15 group of housing associations, which highlighted that people living in London’s social housing contribute almost £28 billion a year to the economy, demonstrating the value of providing secure and affordable homes.

Despite the barriers to boosting council housebuilding, there are a range of solutions through which to support councils to increase capacity and develop new homes.

Addressing historic debt

We have outlined the long-term impacts of the 2012 HRA debt settlement, and how this has severely restricted councils’ capacity and ability to build new homes. Solving the debt problem would remove the biggest obstacle to councils building new homes.

Shelter have recently updated CIH’s research to demonstrate that debt reduction could unlock new housebuilding, with every £1 billion of debt written off delivering the potential for 8,900 new social rent homes. Overall, this could lead to a total of between 190,000-280,000 social rent homes being delivered by councils as a result of debt relief. The research also engaged with a representative body of councils who were open to a type of ‘compact’ which would be a commitment to deliver new social rent homes in return for HRA debt reductions or relief. This shows that addressing historic debt can directly support council housebuilding and increased delivery through councils’ additional financial capacity.

Providing long-term certainty

CIH welcomed the government’s announcements of the £39 billion Social and Affordable Homes Programme for ten years, as well as the ten-year social rent settlement with rent convergence. Our analysis with Savills demonstrated the significant support rent convergence and a long-term rent settlement could provide to councils.

However, councils, alongside the wider housing sector, have been impacted by continuous policy change in recent years, particularly with regard to government rent policy. It is vital that this long-term approach is maintained throughout any government or political changes, to ensure that councils can plan ahead and commit to sustainable housebuilding programmes.

It is also essential that government creates a sustainable future for council housing finance and HRAs more generally. There is a case for reviewing the status of councils’ HRAs and how they can become more robust and independent, making them completely separate accounts.  

Given the government’s new commitment to council housebuilding and to strengthening local authorities more generally, there is also a strong case for examining the status of HRA investment in relation to the government's fiscal rules, removing the anomaly that equivalent investment by housing associations sits outside the current measures of government debt. In this respect, councils are disadvantaged compared with associations, since their borrowing is inevitably subject to greater constraints given its effects on overall public sector debt.

Expanding access to affordable finance

The government’s announcement of low-interest loans through the National Housing Bank was welcomed as an additional route to financial support for new development by the sector. However, these loans are not available to local authorities. CIH supports local authorities having access to long-term, low-interest loans for investment in housing through the HRA, as a means to facilitate council housebuilding.

Further, the HRA concessionary rate for borrowing on the Public Works Loan Board (PWLB) was only extended until March 2027, with a commitment to keep this under review. It is essential that councils are kept updated on the progress of this review, to provide long-term certainty.

Partnership working

It is clear for many in the sector that partnership working is essential to boosting the delivery of social housing. CIH’s 2017 ‘Building Bridges’ report highlighted how councils and housing associations can work jointly to address local housing needs. Many of the challenges still exist today, with strained funding, a challenging operating environment and cuts in resources and capacity. However, the sector as a whole wants to ambitiously increase housebuilding, and there are good examples of partnership working facilitating this delivery, detailed in the ‘Building Bridges’ report.  

There are many models of partnership working, with some examples outlined below:

• Joint ventures - The sector is increasingly seeing the use of joint ventures with developers to rebalance the lack of capacity in local authorities in a private/public sector partnership. Barking and Dagenham Council’s regeneration arm, Be First. 
• Development vehicles - There are examples within the sector of local authorities and housing associations working together under a development vehicle, as seen with Eastleigh Borough Council and Vivid under Aspect, to deliver almost 300 homes. This partnership supported the ambition of the council to develop new homes, with additional support on the development and housing management capacity from Vivid.
• Innovative design - Partnerships can also provide opportunities for innovative and sustainable developments in council housebuilding. Ashford Borough Council delivered net zero-operational carbon, move-on accommodation in collaboration with ZED PODS, to provide homeless households with good-quality, secure housing. Whilst not permanent social housing, the scheme is an example of where innovative approaches with modular construction can create sustainable and affordable housing solutions.

Cross-nation lesson learning

Finaly, it is important that we are learning lessons and best practices from across the UK to inform our understanding of council housebuilding, and where similar barriers or potential solutions could be helpful for England’s context. CIH works across the nations and has gathered evidence from our devolved policy teams to inform this response. We would be happy to share further information or examples of this work from our devolved policy teams.

In Scotland, local authorities began to build new homes again after the abolition of Right to Buy, which is similar to the context for local authorities in England. Scotland has declared a housing emergency, which call for all partners to accelerate the delivery of high-quality homes, particularly social rent.

In the financial year 2024/25, local authorities started work on 1,396 homes and completed 1,698 homes, providing around a quarter of affordable completions. However, housing associations continue to build the majority of new homes in Scotland. This is due to a number of challenges for local authorities:

• Local authorities receive less grant per unit from the Scottish government (although grants are – overall – significantly higher in Scotland than in England)
• Rent setting is complex within local authorities due to the role of politics and elected officials
• The age of existing homes is a bigger issue for local authorities, leading to some paying higher maintenance costs.

In Wales, there are lessons to be learned from successes in the Local Authority Delivery Programme (LADP). Through the LADP, the Welsh Government, is supporting 11 local authorities to develop and build new council housing, within a context of economic uncertainty. The programme began in 2020 and has improved councils’ capacity, promoted lesson learning across councils, and supported over 20 projects. The LADP has allowed councils to begin building homes and has created a pipeline for new affordable homes in the future. CIH Cymru has supported this programme, and we would welcome the opportunity to share further details.

In Northern Ireland, the traditional role of local authorities ended with the creation of the Northern Ireland Housing Executive and later the shift to new build largely being the responsibility of housing associations. In 2020, AHBs provided 46% of new social housing. Local authorities play a vital role in delivering and managing social housing, but all housing completions come from AHBs or the private sector. The current Housing Supply Strategy aims to secure 100,000 new homes over 15 years, of which one-third is to be social housing. The UK Housing Review 2026 outlines limitations on reaching these targets, with significant investment challenges faced by the Northern Ireland Housing Executive.

We recommend that the Treasury and MHCLG be tasked jointly with urgently reviewing these issues to facilitate council house building.

For more information on our submission please contact Megan Hinch, policy manager, megan.hinch@cih.org.