The government’s upcoming decision on social rent convergence will “lay the financial foundations” for building thousands of new council homes in the capital and help to stabilise social housing budgets, according to London’s boroughs.

With the government set to confirm its policy this month, the cross-party London Councils group is asking the government to enable a social rent convergence rate of at least £3 per week from April 2026.

Rent convergence, which was government policy between 2002 and 2015, helps ensure residents in similar socially rented properties pay the same rent.

In the face of a worsening crisis facing social housing finances in the capital, London Councils’ analysis shows that rent convergence at £3 per week is crucial for:

• Boosting resources for building much-needed new social housing. Failing to enable £3 per week rent convergence could mean at least 7,000 fewer council-led homes over a decade compared to if boroughs secured the additional revenue
• Reducing homelessness rates and temporary accommodation pressures through expanded social housing provision – creating a net saving in government spending of at least £115m over the next decade in lower temporary accommodation costs
• Reversing the spending cuts boroughs are currently required to make in their council housing budgets due to costs exceeding income. According to London Councils, without additional revenue, boroughs in the capital will be forced to make a real-terms reduction of £269m in spending on council housing repairs, management, and resident services over the next four years in order to balance their council housing budgets (Housing Revenue Accounts).

The boroughs have also emphasised how vital it is that social rent convergence is introduced from April alongside new social rent levels for 2026-27. Any delay to rent convergence will mean boroughs’ council housing costs continuing to outstrip their income, and worsening pressures on budgets. This will jeopardise council housebuilding, as well as undermine progress on decarbonisation and raising standards in London social housing.

Cllr Grace Williams, London Councils’ Executive Member for Housing & Regeneration, said: “Boroughs want to boost investment in council housing, but instead we face stark budget pressures and real-terms cuts.

“We hope 2026 will be the year we turn around the crisis in council housing finances and rent convergence should be an integral part of that. If the government enable us to introduce a rent convergence rate of £3 per week from April, this will lay the financial foundations of a much better future for London council housing.

“Boroughs are determined to work with ministers to deliver on our shared ambitions for housing. This includes making sure social rent levels are fair for tenants, put budgets in a healthier position, and bring investment for the much-needed new social homes that will help reduce homelessness and boost economic growth.

“But without rent convergence at an adequate rate, we fear continuing budget shortfalls holding back delivery of the new council homes we all want to see.”

London local authorities own and let around 390,000 social homes – housing more than one in 10 London households.

However, London Councils has highlighted how boroughs’ budgets for social housing are in a state of managed decline, undermining their ability to improve existing homes or to build new council housing. Boroughs point to rent convergence as their top priority for bolstering social housing resources in the coming years.