Local authorities across Britain have paid nearly £650 million to property middlemen over the past five years as they struggle to cope with an escalating housing crisis, according to exclusive data analysis.
The Scale of the Problem
Thirteen councils have collectively spent £633 million since 2020 on a controversial arrangement known as rent-to-rent, where intermediaries rent properties from landlords only to sublet them to local authorities at a profit.
Two London boroughs account for the majority of this expenditure, with one having declared bankruptcy three times during this period and another warning it faces financial collapse due to overwhelming housing costs.
Ben Twomey, chief executive of campaign group Generation Rent, expressed concern about the ethics of the practice. "Not only does a landlord get a big payday, but a middleman takes a juicy cut of the proceeds for doing very little," he stated.
London's Spending Crisis
Newham and Croydon emerge as the biggest spenders by a significant margin, accounting for just over half a billion pounds between them.
Earlier this year, both councils were among thirty authorities promised additional government funding to cope with severe financial pressures, with Croydon set to receive £136 million and Newham £51.2 million.
Newham was granted special permission by the government to raise council tax by 8.99% without holding a local referendum after ending the last financial year £22.2 million in deficit, largely due to "spiralling costs of homelessness".
A Newham Council spokesperson acknowledged the challenges, stating: "Much of this is due to landlords leaving the private rented sector because of regulatory changes such as tax reforms and concerns around the Renters Reform Bill."
Council Bankruptcy and Rising Debts
Croydon was described as "one of the most financially distressed councils in the country" by local government minister Jim McMahon in June.
The council's debt currently stands at £1.4 billion and is projected to rise to more than £1.9 billion by 2029.
Council tax in Croydon has increased by the maximum 4.99% for 2025/26, following a massive 14.99% increase in 2023/24. Meanwhile, social housing waiting times in the borough can stretch up to ten years.
A Croydon Council spokesperson defended their use of rent-to-rent arrangements, noting they account for only 7% of their temporary accommodation portfolio and provide "a long-established model" used by many councils nationwide.
Understanding Rent-to-Rent
The rent-to-rent model is entirely legal, providing property owners with guaranteed rental income while transferring management responsibilities to an agent.
These agents then let the properties to third parties - in this case, councils housing homeless residents - typically charging more than they pay the landlord, thus generating profit.
Al McClenahan of Justice For Tenants, which works with 133 councils, noted that rent-to-rent has "exploded" in recent years.
"Generally, the more links there are in the chain, the more issues there are," he observed, while acknowledging that the arrangement still represents better value than hotel accommodation for homeless families.
Root Causes and Government Response
Council sources consistently point to the same underlying issues: rising homelessness and insufficient housing supply.
According to the Resolution Foundation, the number of households in temporary accommodation in England has reached a record 128,000, up from 50,000 in 2010.
The waiting list is even more staggering, with 1.33 million households across England queuing for social housing as of March 2024.
Analysts often trace the shortage back to Margaret Thatcher's Right to Buy scheme, under which more than two million social homes have been sold in England since April 1980.
The new Labour government has set a target of building 1.5 million new homes during its first five years in power, with plans for 180,000 social homes over the next decade.
However, the Resolution Foundation has cautioned that the country is starting from a "historically low base of house-building", with planning approvals for new housing in the last quarter of 2024 reaching their lowest level since 1979.
