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05 Feb 25

'Hard times are still here' as London Councils highlights funding shortfall

London boroughs have warned that they face a £500m funding gap in the coming year, despite receiving a 5.7% increase to their Core Spending Power.

Responding to the local government finance settlement 2025-26, which has now been finalised by MHCLG and awaits approval from the House of Commons, London Councils has warned of significant funding shortfalls in key service areas and emergency borrowing becoming the norm for boroughs.

Chair of London Councils, Cllr Claire Holland, said: "Massive service pressures and tight funding constraints mean that hard times are still here for boroughs’ budgets. Having faced more than a decade of structural underfunding, councils in the capital remain under enormous financial strain.

“We are dealing with a range of immense challenges in London, but the worsening homelessness emergency represents the biggest single risk to borough finances. The impact of homelessness on Londoners – especially families with children – is devastating, and the costs to boroughs are utterly unsustainable.

“With more and more boroughs forced to turn to the government for Exceptional Financial Support simply to stay afloat, it is clear that there is a long way to go to end the crisis in local government finance.

“Boroughs provide vital local services for our communities and play a crucial role in delivering new homes and driving economic growth. We desperately need financial stability and will carry on working with the government to achieve this.”

London Councils’ analysis suggests at least seven boroughs in the capital will require Exceptional Financial Support (EFS) from the government to balance their budgets in 2025-26. This marks an increase from the two London boroughs relying on EFS arrangements in 2024-25, and the amount of EFS funding directed to local authorities in the capital will need to increase by over 500% (from £70m in 2024-25 to £430m in 2025-26).

Boroughs highlight this growing reliance on EFS as further evidence of structural underfunding and are calling for better forms of support from central government for councils struggling with the most urgent budget pressures.

As the housing crisis persists, 56% of Londoners support building on grey belt

A majority of Londoners support building new homes on grey belt land, according to research commissioned by

London Councils and undertaken by pollsters at Ipsos.

London Councils yesterday published its annual Survey of Londoners, which found 56% in favour of housebuilding on the grey belt – defined as “parts of greenbelt land which have previously been built on, such as car parks and old petrol stations” – with 18% opposed. Almost three quarters (74%) of people living in London support housebuilding in their area if the new homes are affordable to locals.

Londoners believe the cost of living and housing affordability are the most important issues currently facing the capital, according to this survey.

Chair of London Councils, Cllr Claire Holland, said: “Londoners are acutely aware of the massive housing pressures in the capital and the desperate need to build more affordable homes.

“London faces the most severe homelessness emergency in the country. Driven by the worsening shortage of affordable housing, far too many Londoners are struggling with their housing costs and at risk of becoming homeless.

“Boroughs are determined to do all we can to support our residents and to end this crisis. We want to work closely with the government in ensuring low-income households are helped to meet their housing costs and avoid homelessness. Alongside this we are resolutely pro-housing growth, and keen to work with ministers in ramping up bricks and mortar delivery. Our communities are crying out for new affordable homes – we must ensure 2025 becomes the year of turbocharged housebuilding in London.”

You can read our survey results in full here.

Grants Programme 2026-2030

London Councils is inviting London-based voluntary and community, and not-for-profit organisations with expertise in combatting homelessness and/or tackling domestic and sexual abuse, to attend a market warming event for the Pan-London Grants Programme 2026-2030.

Attendees will hear an outline of the services London Councils is considering commissioning for the 2026-2030 programme and will have an opportunity to ask questions and offer expert advice.

There are two separate sessions taking place on Tuesday 11 February and on Friday 14 February. Please only register for the session you wish to attend.

Further details and registation:

Tuesday 11 February, 15.30 -17.00

Friday 14 February, 15.30 - 17.00

In the news this week...

'There is no surplus after the cost of our rent'

BBC News

Council tax increases confirmed as seven London boroughs apply for emergency funding to stave off bankruptcy

The Standard

London borough chief steps down

LGC

Expert warns London must 'strengthen' efforts to hit zero-HIV target

The Standard

Concern over new audit body

The MJ

Questions over financial impact of reorganisation

The MJ

The Renters’ Rights Bill received its Second Reading in the House of Lords yesterday (4 February). Ahead of the debate, London Councils briefed all London members of the House of Lords on borough's views.

The Renters’ Rights Bill represents a major step forward and London Councils welcomes many of the measures included in the Bill and we support the government’s aim to deliver a fairer, more secure, and better quality private rented sector (PRS). In the context of London’s severe housing pressures, growing homelessness crisis, and lack of available PRS properties, there are several areas where we are seeking further policy action from the government.

You can read our briefing in full here.