Scots councils hit with rising £6bn housing debt mountain

And the number of tenants in rent debt has soared by 22% in the past ten years with nearly 120,000 now in hock.

The rising tide of council housing debt and rent arrears has comes as three local authorities have registered a housing emergency as they struggle to deal with homelessness - Glasgow, Edinburgh and Argyll and Bute.

It has led to calls from housing campaigners for more to be done to protect tenants.

The Convention of Scottish Local Authorities (COSLA), the national association of Scottish councils said that it was "no surprise that many are struggling to meet their day to day costs and that rent arrears have risen".

Official returns from local authorities have revealed that the estimated £5.775bn council housing debt registered by the end of March, this year, has nearly doubled since 2012 when it was at £2.69bn. It has risen by nearly £800m in just a year.

It is understood that part of the rise in debt is the result of increased borrowing by councils to meet the capital costs of new build housing and improvements to existing houses along with cuts in receipts from the sale of homes. In 2023/24 loan charges to councils are estimated at £357.9m - a rise of nearly £70m in a year.

READ MORE: ScotGov rent rise curbs blamed for 'forcing' landlords out

North Lanarkshire Council is sitting on the highest level of housing debt in Scotland at nearly half a billion pounds. It's £498m debt is nearly treble that recorded in 2012 when £162m was owing.

The City of Edinburgh has a debt of £496m - over £150m more than in 2012.

And Aberdeen City is sitting on an estimated £399m of housing debt, nearly double that seen 12 years ago.

The Scottish Tenants Organisation said it was concerned that proposed rent hikes for those in council tenancies will lead to the most financially vulnerable tenants who are already facing arrears being evicted unless immediate action is taken to stop it.

"Financially vulnerable tenants need help not punishment in these severely troubling times," the STO said

According to figures collected from local authorities, the annual amount owing from rent as at March, 2023, is more than double that of ten years ago when just over £40m was owed.  It has risen by nearly £12.5m in a year.

The City of Edinburgh has the highest rent arrears mountain standing at £13.16m while Aberdeen City  is dealing with £10.72m of debt while Fife is owed £9.4m

The rent arrears across Scotland represents 8.6% of the £1.327bn annual income councils expect from properties to rent and has gone up from 7.8% on the previous year.

Analysis seen by the Herald shows that it is at the highest level for a decade, with the annual amount owed nearly doubling in ten years.

During the ten years average weekly rents have risen by 38% from £59.73 to £82.46.

But the level of rent debt has varied from 16.5% of annual income expected in Midlothian to 1.2% in East Renfrewshire.

It can be revealed that as of the end of March, 2023, there were 111,618 council tenants in arrears, an increase of 1,272 tenants on the year before.

The Herald revealed that local authorities are already sitting on a council tax debt mountain of over £1.3bn after warning they were at risk of bankruptcy if funding from the Scottish Government was not improved.

The debt mountain equated to nearly half the £2.837bn expected to be collected in council tax from Scots households in 2022/23.

At the end of the financial year council tax outstanding within the 12 months has risen by over 12% since the pandemic from £96.947 in 2018/19 to £108.771m in 2022/23.

At March 31, the end of the 2022/23 financial year, Scotland's cumulative council tax debt mountain recorded from 1999/00 had grown to £1.343bn. It was at £1.157bn in 2019/20.

Sean Clerkin, campaign co-ordinator for the STO said: "We need immediate watertight rents controls in the social rented sector allied to homeless prevention measures as at the end of the day it is more expensive to evict tenants and their families than keeping them in their homes hence the declared housing emergencies by local authorities across Scotland."

It comes as the public spending watchdog has warned that the finances of Scottish councils are not unsustainable but there are “real risks” in the future.

An analysis of council finances from the Accounts Commission said the total budget gap in the country’s local authorities rose to £725m for the next financial year – almost double the £476m from the year before.

Despite warnings from the Local Government Information Unit in December that up to a quarter of Scottish councils could face “effective bankruptcy”, the commission said auditors had not found evidence any were “financially unsustainable in the short term.”

However, it warned: “The financial outlook is extremely challenging, with Scottish councils facing unprecedented financial and service demand pressures which present real risks for the future.”

In March, last year, the Herald revealed that rents in Scotland for some of the nation's most vulnerable were to soar by up to 8% while those in the private sector will be capped at 3%.

Rent rises approved by over 100 housing associations in Scotland were at an average of 5.34% and ranged between 0% and 8% as arrears hit a record high of £160m.

It comes after tenants’ rights minister Patrick Harvie said in the wake of concerns about rent increases that voluntary agreements reached with social landlords would keep rents "well below what they are in the private market and limit rises next year".

The rising rents led to concerns amongst housing campaigners that eviction cases will also increase as tenants struggle to pay.

The typical rent rise in homes controlled by local authorities was 3.8%.

In September, 2022, the First Minister announced plans for an eviction ban and an immediate rent freeze for social housing and private tenants in the cost of living crisis.

The Scottish Government later turned the freeze into a rent cap of 3% but decided it would only apply to tenants renting from private landlords.

But this was not extended to those renting from social sector landlords such as councils and housing associations who tend to provide lower cost accommodation taken by the poorest and most vulnerable in the country.

The rent cap has been extended till the end of March.

A COSLA spokesman said: “Austerity, the pandemic and the cost of living crisis have pushed many into poverty.  The 317,000 households living in Scotland’s council houses include many of those most badly affected.  Around 60% of council tenants receive either Universal Credit or Housing Benefit as a result. 

"Councils work hard to ensure that tenants get the help that they need, including access to benefits advice. 

"Given pressures on tenants, the reality is that rent arrears must be budgeted for. Councils must plan carefully to ensure that, despite the challenging financial environment, rising arears don’t impact services to tenants.

“All social landlords work hard to avoid evictions and the courts will only grant one where it is reasonable to do so.  In recent years a number of Councils have introduced “tenant support funds” to assist those most at risk.

“Councils have also invested tens of millions of pounds over the past 20 years to improve the energy efficiency of our homes and reduce utility bills.  In fact over the past ten years, councils have invested over £7bn in improving existing homes and providing new ones.

“The whole of the day to day cost of council housing is met through rental income, there is no 'subsidy' provided by the council taxpayer or the Scottish Government. Councils are obliged to consult tenants each year and take account of their views when they set the rent.   

"Rising inflation has pushed up the cost of service delivery, but despite this councils have worked hard to minimise rent rises.  Rents have risen below inflation for the past two years and are now around 9% lower than they were two years ago in real terms at an average of £82.46 a week (£357.93 per month). 

"In the current circumstances we are confident that this represents value for money and that councils are delivering services, including support for those in financial difficulties, with the best interests of tenants at their heart.”

A Scottish Government spokesman said: “Advice services are critical to Scotland’s communities, supporting people to understand their rights and entitlements, maximising incomes and helping to reduce poverty.

"In 2023-24 the Scottish Government has allocated £12.3 million to support free income maximisation, welfare and debt advice services.

“We are allocating almost £3 billion this year to support policies which tackle poverty and to protect people as far as possible during the ongoing cost of living crisis.

"This includes making £83.7 million available for discretionary housing payments to prevent people having to pay the bedroom tax, to mitigate the benefit cap as fully as possible and to protect against other UK government welfare cuts.”