Council Temporary Housing Costs Set to More Than Double to Nearly £4bn by 2030
The cost for local authorities in England to provide temporary accommodation for homeless individuals is projected to more than double, reaching almost £4bn by the 2029-30 financial year, according to an exclusive analysis by the Local Government Association (LGA). This alarming forecast highlights the escalating financial burden on councils as they grapple with soaring demand and inadequate reimbursement from government housing benefits.
Growing Subsidy Gap Threatens Council Finances
Since the 2017-18 period, councils across England have spent approximately £1.5bn more on temporary accommodation than they have received back in housing benefit reimbursements from the government. Without immediate intervention, this subsidy gap is expected to balloon to a staggering £3.9bn over the next four years. The LGA is urgently calling for government action to address this crisis, which is placing immense strain on local authority budgets.
Tom Hunt, chair of the LGA's inclusive growth committee and leader of Sheffield City Council, emphasized the severity of the situation. "The temporary accommodation subsidy gap is a problem that is getting worse each year," he stated. "Councils are trapped in a vicious cycle of ever-increasing temporary accommodation costs versus static rates they receive back to cover their expenses."
Record Numbers in Temporary Accommodation
The scale of the temporary accommodation crisis in England shows no signs of abating, having reached record levels following the Covid-19 pandemic. Homeless individuals are frequently placed in hotels, bed and breakfasts, or self-contained flats. Recent data reveals that the number of children living in such accommodations has increased by 12,020 in just one year, reaching a historic high of 175,990. In total, more than 130,000 households are currently residing in temporary accommodation across the country.
Funding Mechanism Exacerbates the Problem
Local authorities bear the full cost of providing temporary accommodation, but the amount they can reclaim from the Department for Work and Pensions (DWP) is capped at 90% of the local housing allowance (LHA) rates, which were last set in 2011. This outdated system means that as demand for temporary accommodation rises, councils are able to recoup a diminishing proportion of their actual expenses.
In the 2024-25 financial year, councils in England spent a total of £1.27bn on temporary accommodation and were reimbursed only £911m by the DWP, leaving a substantial gap of nearly £360m. The LGA warns that this problem is intensifying, with the annual cost to councils projected to grow by 65% over the next five years, from nearly £360m to £595m.
Calls for Policy Reform and Increased Funding
The LGA is advocating for the government to uprate housing benefits to 90% of the current 2024 LHA rate. "This adjustment would provide a significant boost to council finances," Hunt explained. "The additional funds could be directed towards preventing homelessness and constructing the homes that our communities desperately need." According to the LGA, this change would reduce the projected cost increase by 37% and save councils approximately £1.5bn.
Despite these calls, the government has frozen local housing allowance rates until 2026, arguing that building more homes and addressing malpractice in the private rented sector are the primary solutions to the problem. Homelessness minister Alison McGovern has expressed a commitment to reducing the use of temporary accommodation, aiming to end the reliance on B&Bs by the end of the current parliament.
The Ministry of Housing, Communities and Local Government has been approached for comment on the LGA's findings and recommendations. As the temporary accommodation crisis deepens, the need for comprehensive policy reform and increased funding becomes increasingly urgent to support vulnerable households and alleviate the financial pressure on local authorities.
