More councils could face bankruptcy if housing homeless families in temporary accommodation continues to cost more than £1bn a year, local authority insiders have warned.
Exclusive data from the Local Government Association (LGA), shared with i, show that the total amount spent on temporary accommodation by councils across England has soared over the past eight years.
Temporary accommodation includes emergency housing such as hotels, B&Bs, privately rented homes, converted office blocks, shipping containers and hostels. It is used to house individuals and families who have been made homeless, often because of an eviction and when there is no social housing available.
According to analysis of the LGA’s revenue account data, the total amount spent by councils on temporary accommodation has soared by more than £733m since 2015/16.
Back then, councils spent around £315m on emergency housing. However, in 2023/24 they spent £1.048bn. The true figure could be higher and may rise when the latest data on spending is available.
“Temporary accommodation bills present a growing risk to councils’ financial sustainability,” Councillor Claire Holland, the LGA’s housing spokesperson, told i.
Some of the worst-hit councils are now spending more than half of their total housing budget on emergency temporary accommodation.
In 2015/16 the total spent on temporary accommodation was, on average, 18 per cent of a council’s total housing budget. It now accounts for 61 per cent, according to the LGA. The budget is also needed for other services such as early homelessness prevention, vital homelessness support including mental health and addiction services and what is known as “move-on” accommodation for rough sleepers. This helps people who have ended up on the streets transition into safe housing.
Some local council officials from across the country told i that they fear being forced to cut budgets or raise council tax if nothing is done to support them with temporary accommodation costs or to increase the supply of social housing.
If nothing is done, Ms Holland and the LGA, which represents councils across England and Wales, are warning that temporary accommodation costs could push local authorities towards financial ruin.
The LGA said councils are now being forced to spend such large sums because there are nearly 113,000 households in temporary accommodation.
Councils issue a Section 114 notice when they are financially on the ropes. This is comparable to declaring bankruptcy. In 2023, Birmingham Council did this and announced it would raise council tax by 21 per cent over two years. It also cut its housing budget.
Concerns have been raised about the impact of living in temporary accommodation on families. Last year, i reported that homelessness may have been a contributing factor in at least 34 children’s deaths in England between April 2019 and March 2022.
Ms Holland, who is also the leader of Lambeth Council in London, said “affordable social housing is in short supply because of Right to Buy and private sector temporary accommodation providers know they can keep increasing the cost as a result”.
“We would rather give people permanent homes than spend taxpayers’ money on private temporary accommodation which gets more and more expensive because providers know we have no option but to pay them.”
Ms Holland said some providers in her south London borough “hiked [the price of] temporary accommodations rapidly last year and said they’d pull the plug if we didn’t pay”.
Such an outcome would have been a “nightmare” because “a whole load of housing supply would have disappeared, leaving homeless families in the lurch, she said.
“We’re caught between needing this accommodation and having to deal with providers who are overcharging.”
Labour promised to immediately ban Section 21 ‘no fault evictions’ if elected. These are a leading cause of homelessness and drive renters into temporary accommodation. The party’s manifesto also pledges to introduce a cross-government strategy to end homelessness, working with mayors and councils across the country.
However, neither Labour nor the Conservative Party have pledged additional funding to help ease the burden of temporary accommodation bills.
In their manifesto, the Conservatives committed to a review of the quality of temporary accommodation.
Many councils are now struggling due to their temporary accommodation bills. According to the LGA’s figures, some of the worst-hit are Hastings, Crawley, Arun, Swale, Havant, Dartford, Canterbury and Dover.
In each of these places, homelessness has soared as rents and house prices have risen in recent years. As a result, so has the spending required to support people who have been evicted.
The increase in homelessness spending means that councils have less money to invest in and run homelessness prevention services.
A Hastings Council source described their situation as “a massive challenge” and said that Section 21 “no-fault” evictions were a big part of the problem.
“We are only a small authority. But last year our net spend on temporary accommodation was about £6.5m but our entire budget is around £17m, so that’s a huge proportion of our budget.”
Hastings Council is trying to buy former council properties back from private landlords – something Lambeth Council has also done.
“We need to wrestle back control of our housing market,” the source said.
Analysis: A growing temporary accommodation crisis
Private rents are rising faster than overall inflation. And with a contracted supply of affordable homes, this has worsened the housing crisis.
According to the latest data from the Office for National Statistics (ONS) the cost of renting privately is rising faster than overall consumer inflation which is now back at 2 per cent. Private renters’ housing costs rose by 9.2 per cent between March 2023 to March 2024.
This has created an enormous problem for lower-income private renters who rely on housing benefit (via universal credit) to pay their rent because the available state support has not kept up with private rent increases.
Housing benefit is calculated by something known as the Local Housing Allowance (LHA). This was boosted by the Conservative Government in November 2023. However, rent inflation has already wiped out that increase in some places.
This has caused the number of homeless families and individuals to rise, creating a temporary accommodation crisis. That, in turn, has created a financial crisis for local councils.
The worst-hit councils are now spending millions of pounds a year on trying to cope with the fallout of an unprecedented expansion in the number of homeless people in need, particularly families with children, who have been evicted or priced out of the private rented sector.
The LGA is urging the next Government – which polls indicate will be Labour – to take urgent action to relieve some of the pressure being caused by rising homelessness and spiralling temporary accommodation costs.
Ms Holland called for “a new settlement for local authorities” to help better support homeless people and prevent people becoming homeless in the first place by ensuring there is enough social housing.
The LGA said this would include reforming Right to Buy so that any social housing that is sold off is replaced with new social homes, and allowing councils to keep 100 per cent of sales receipts.
It would also include scrapping permitted development rights (PDR), which allow former office buildings to be turned into often substandard housing without planning permission and an immediate ban on Section 21 “no-fault” evictions of renters.
She also called for more investment in social housebuilding and allowing local government continued access to preferential rates through the Public Works Loan Board when borrowing to build affordable homes.
A commitment to increase the LHA and a substantial increase to Affordable Homes Programme (AHP) grants which fund affordable housebuilding should also be looked at.
Angela Rayner, Labour’s deputy leader and shadow Housing Secretary, said “the Tories have abandoned families across Britain by failing to act.”
Ms Rayner blamed “a toxic mix of rising rents and a failure to end no-fault evictions” for the situation, and said councils were “left picking up the pieces of the Tories’ housing crisis”.
If elected, she said Labour would “put an immediate end no-fault evictions and deliver the biggest boost to affordable, social and council housing for a generation”.
Labour has made no commitment to allocate new funding to local authorities specifically to deal with the temporary accommodation crisis.
The Conservative Party was contacted for comment.