Posh council homes in Southwark’s wealthiest areas could be sold off more easily after the council rubber-stamped a rule change.
Labour-run Southwark Council needs cash to fund its struggling housing fund and council home sales will help finance the construction and maintenance of other council homes.
But the Lib Dem opposition leader has warned that the council is “selling off the family silver” and that wealthy areas like Borough and Dulwich already face a lack of social housing.
Southwark Council has responded by saying it’s facing a “stark reality” of “underfunding” and that the sales were designed to stabilise its accounts.
The rule change relates to council ‘voids’ – homes or assets that are often too dilapidated to relet without undergoing extensive repairs.
Until now, council officers have only been allowed to sell off assets with a value of £750,000 or less.
If properties are worth more than that, Southwark’s councillors have traditionally been called in to oversee the sales and decide whether to give them the thumbs up.
But following a rule change, approved by the council on February 6, the council’s cabinet will only be consulted on sales worth £3 million or more.
Selling off ‘uneconomic voids’ to raise money is not a new policy and is shared by local authorities across the country.
The rule change applies to council assets like commercial units as well as residential properties.
But there are fears that the rule change will make these council home sales far easier than they were previously.
Cllr Victor Chamberlain, Southwark Liberal Democrat Leader, said: “We’re now at a point where the council is having to sell off the family silver just to stay afloat, with the already limited council housing in wards like Dulwich and Borough under the most threat.”
He admitted the council was seeing “chronic underfunding from the Tories” but said this had been compounded by “Labour mismanagement”.
Cllr Stephanie Cryan, cabinet member for communities, democracy and finance, said the council had “made no secret of the stark reality of what underfunding council housing in England has created”.
Selling off council homes is one of the few ways Southwark Council has of funding its Housing Revenue Account – the fund used to maintain and build council homes.
In 2012, the government introduced a new framework which meant local authorities’ housing funds had to be self-financed.
This means councils aren’t allowed to move money from other departmental budgets into that account.
Instead, HRAs are ring-fenced and mainly reliant on borrowing, rental income from council tenants, and sometimes the proceeds from selling council homes.
However, rental income hasn’t been as strong as Southwark Council would have hoped since the self-financing model was introduced over a decade ago.
For one, rising construction costs have stalled the pipeline of new council homes like those on the Bells Gardens and Lindley estates.
Moreover, the 2012 Welfare Reform Act meant councils had to reduce rent levels by one per cent each year from 2016, which Cllr Cryan has previously said “dismantled” the self-sustaining model.
Today, Southwark Council’s HRA faces a crisis. In August 2023, the council was forced to take £6.7 million from its housing reserves to support the HRA, bringing its back-up fund to its “lowest ever point”.
Data exclusively obtained by Southwark News in July 2023 showed there were 1,469 void council properties under Southwark’s control.
However, 80 per cent of these were on estates earmarked for demolition so are unlikely to be sold.
Southwark Council did not provide the latest figures for its void properties despite a request from the News.
Most council homes are valued well below £3 million but there have been cases where they sell for more.
In 2023, the Local Democracy Reporting Service wrote that a Bankside council house around the corner from Borough Market could sell for around £3 million.