The body representing local authorities in the capital says the government must provide more funding ahead of 2025

Claire Holland (credit Magnus Andersson-Lambeth Council) — Claire Holland (credit Magnus Andersson)

Housing and homelessness pressures pose the “fastest-growing risk” to boroughs and are “wreaking havoc” on town hall finances in the capital, London Councils has warned.

“Skyrocketing” numbers of homeless Londoners requiring temporary accommodation and the worsening state of social housing budgets threaten the overall stability of borough finances – with several local authorities in the capital said by London Councils to be “edging closer towards effective bankruptcy”.

The representative body for 33 local authorities in the capital forecasts that boroughs will face a collective budget shortfall of at least £700m next year unless the government provides more funding support.

In Enfield, the council has been trying to manage one of the most severe housing shortages in the whole of London over the past two years and, as a result, overspent on temporary housing by £17.4million in 2023/24. This accounted for almost half of the total overspend across Enfield Council’s entire budget.

Last week, fresh financial reports spelt out the continuing financial challenges faced by Enfield Civic Centre, including its risk reserve falling to a level “near the very minimum” needed.

Making its submission to the Treasury ahead of the new Labour government’s first budget announcement on 30th October – when Chancellor Rachel Reeves will also set out her spending review decisions for 2025/26 – London Councils says its top priority is to stabilise local government funding.

The cross-party group says shoring up borough finances is critical for boosting their ability to help tackle the housing crisis, drive economic growth, and invest in the preventative services that bring long-term benefits to Londoners.

Claire Holland, chair of London Councils, said: “The housing crisis is having a devastating impact on Londoners’ lives and wreaking havoc on town hall finances across the capital.

“Housing and homelessness pressures are the fastest-growing risk to London borough finances. At a time when we need to invest in social housing and support homeless Londoners, boroughs are facing an unrelenting squeeze on our resources. The unavoidable reality is that spiralling costs and years of underfunding threaten to break boroughs’ budgets.

“The current outlook is bleak, but we are committed to working with the government to find a better way forward. The upcoming budget is a crucial chance for the government to restore much-needed stability to council finances and the local services we provide. This will enable boroughs to play our part in tackling the capital’s housing crisis and driving economic growth in London and across the country.”

London Councils has welcomed the government’s commitment to multi-year spending reviews, multi-year financial settlements, and ending competitive bidding. However, it says that “although these changes will improve boroughs’ funding certainty”, they will “not in themselves address the immediate crisis in council finances”.

Boroughs argue a failing local government sector will only exacerbate broader economic and fiscal challenges. The overall levels of funding, unsustainable homelessness numbers – with 175,000 Londoners estimated to be living in temporary accommodation, equating to one-in-50 residents of the capital – as well as the need for greater financial autonomy, are the issues London Councils says it wants to see addressed by the government.

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