Boroughs should not be saddled with an unrealistic amount of debt as a result of the government’s proposed shake-up of the council housing finance system, says London Councils.

London Councils has backed plans by the government to overhaul the Housing Revenue Account (HRA) subsidy system – including sharing out existing debt amongst councils – but has called on the government to ensure that this is a one time only deal.

Under the proposed system, boroughs will be able to keep all of the money that they collect in rent and house sales and use it to meet the needs of their tenants. Currently they have to give the government a proportion of this money which is then distributed to councils across the country.

London Councils is also supporting the government’s proposal to share existing national housing debt across all local authorities in England to ensure they each start the new system on an equal footing.

However, London Councils is urging the government to redistribute the debt on a sustainable, ‘once and for all’ basis so that boroughs can plan their long-term spending and are not hit with unexpected financial burdens in the future.

As it plans to share the debt across the sector London Councils is also calling on the government to be alert to the outstanding spending pressures faced by boroughs – particularly those facing a delay in getting their decent homes funding. Taking on lower levels of debt will make it easier for boroughs to manage any other housing funding shortfalls they are facing.

London Councils’ Executive Member for Housing, Councillor Steve Reed, said:

“London Councils and the boroughs have long been lobbying for an overhaul of the way authorities receive funding for managing and maintaining their housing stock. I am delighted that the government has listened to our calls and has proposed some fundamental changes to the system.

“Boroughs best understand the needs of local people and these proposals will make a huge difference to council tenants in the capital. It will mean that the money boroughs collect will be used to improve the quality of their own tenants and will not end up being spent on projects in other parts of the country.

“This is a once in a generation opportunity for us to work with the government and others to develop and secure the long term future of council housing”