The UK has been grappling with economic uncertainty for some time, a situation which has only be worsened in recent years by consistent global instability and other external factors. This economic slump has effected the UK as a whole, with the cost-of-living crisis pushing families closer to the breadline, whilst at the same time businesses face rising running costs and an unstable global supply chain. The social housing industry is no exception, and the sector has been facing significant financial difficulty. The social housing sector however is at a unique intersection of the economic burden, as more people being priced out of the housing and private rented markets means a direct increase in workload for providers, meaning associations today are being faced with climbing workloads and stretched resources whilst simultaneously being forced to be more innovative with finances available.
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But what exactly are the levers at play in this financial pressure? We break down the key funding pressures affecting the social housing space:
Temporary accommodation
For local authorities, the rising rates of temporary accommodation use across the country represent a significant financial crisis as well as a human one. For local authorities, homelessness support has been taking up more and more budget space each year, and for many councils is now draining other departments and initiatives. As these financial pressures continue to grow, they also disrupt councils’ abilities to invest in and purchase new stock, creating a vicious cyclical effect that see’s more families needing support, and more weight added to already stretched finances.
Research from Shelter has shown that spending on temporary accommodation from local councils hit £2.8bn in 2024/25, a 25% increase on the previous year, and a 118% over the least five years. This is not a sustainable level of spending, and is directly linked to the most human consequence of the housing crisis: the families at the bottom of the ladder, who are being made homeless entirely. Temporary financial support to local authorities will do nothing to stop the root cause of this issue, and the crisis of rising homelessness must be targeted at the source by an investment in prevention and holistic support for those going without shelter.
Environmental viability
For housing associations and other social housing providers, net zero has been a dominant force in decision making for some time. The environmental deadline means that providers have a definitive timeline to ensure their homes are up to scratch, but the required efforts are far from straightforward. Although green upgrades will provide savings in the long term, the same criticisms have reared their head time and time again: they are costly, and the ROI is not immediate. Although over time these upgrades will save providers and residents money, the set-up and installation costs are a significant investment, one that is coming at a time when providers’ finances are already pulled in a number of directions.
Whilst the government has lent support in this area with funding schemes and incentives, the need for decarbonisation also overlaps within another significant area under strain: The construction skills gap. Skilled retrofit workers are needed to carry out the large-scale works required, and despite apprenticeship drives and a focus on recruitment from the build sector competent skilled workers and harder to find and in higher demand.
Development costs
Housing Associations and other providers face three key responsibilities: maintaining current stock to a decent standard, keeping rents affordable for residents, and delivering new social housing when it’s required. After years of social housing stock depletion and nowhere near enough replacement, expanding existing stock has become a major priority, and the government’s 1.5M homes target was announced along with a significant focus on affordable and social housing. However, development viability has become increasingly challenging, and as contractors also see their margins tighten and finances stretch, affordable housing has experienced significant challenges. In London, Sadiq Khan and the GLA reduced the affordable housing requirement in order to incentivise housebuilding, a clear indicator of the issues around viability.
Construction inflation, labour shortages, and higher borrowing costs have also pushed up the price of delivering new homes, and grant funding from government has not always kept pace with these increases, meaning providers often have to cross-subsidise affordable housing through market sales or shared ownership. The latest report on affordable delivery in London from the G15 highlighted the large amount of capital the sector has tied up in shared ownership in one of it’s recommendations, calling for a subsidised approach to staircasing in order to free up much needed finances for the sector.
These are just a few of the current financial pressures building for the sector, and a few of the key topics of discussion being broken down at Housing Executive’s Future Foundations conference. Our zone one agenda is focused on how the sector can invest in building resilience for both the obstacles of today and the future, with a host of speaker panels packed with industry leaders and area experts. Secure your space at the first ever Housing Executive Conference here.
