A report brought to cabinet this week has revealed that Southwark’s Housing Revenue Account (HRA) is forecast for a £13.8m deficit.
Additionally, the HRA reserves represent only 6.5% of the total spend, the 17th lowest in London.
The overspend is attributed to additional costs from new fire and building safety requirements, increased cost of borrowing, inflation in the repairs and construction industries as well as lost income from government imposed restrictions on social rent.
The HRA is the budget used by the council to manage its housing stock and build new housing. Government legislation requires the HRA to be primarily self-funded through social rent, leaseholder charges and borrowing.
The report, approved by Southwark’s cabinet this week, outlines how the deficit will limit the council’s ability to deliver Labour’s pledge of 11,000 new council homes.
Even the homes that Southwark has committed to will now be “under constant review” and “subject to the test of affordability”.
The confirmation of Southwark’s HRA deficit comes weeks after reports that Brent council’s finances are “on a knife edge” due to a £13m overspend.
Commenting Southwark Liberal Democrat Leader Cllr Victor Chamberlain 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 cannot afford a new home will be shocked to see this huge overspend.”
