London’s boroughs do not expect local government finance settlements to be warming seasonal gifts. Rather, they anticipate these annual pre-Christmas arrivals being metaphorical pins that will burst any balloons of festive hope naively inflated in civic centres and town halls. They prepare responses expressing tempered disappointment. Rarely does that effort go to waste.
The national deal for 2025/26 is bigger than last year’s and the 32 boroughs will get an estimated 5.7 per cent increase in their overall core spending power. But the response of London Councils, the body that represents all 33 of the capital’s local authorities, has been less than effusive.
“Borough services look set to be stuck in survival mode,” said London Councils chair Claire Holland, who also leads Lambeth Council. She voiced particular concern about funding for an area of boroughs’ responsibility that is devouring more of their resources at an increasingly ravenous rate – the bills that come from placing homeless residents in temporary accommodation (TA) while long-term solutions to their housing problems are found.
Pressures are mounting from all directions. The number of Londoners seeking help from their local councils has gone up at the same time as the options for assisting them have narrowed and the financial cost of them has soared.
London Councils estimates that more than 183,000 Londoners are living in TA, the highest figure yet recorded. It equates to one Londoner in 50, more than half of them children. And more and more of those homeless households are living in the least suitable types of accommodation, which also happen to be the most expensive.
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How has such a situation come about? Councils have duties to “prevent and relieve” homelessness and must consider all applications for their help. Not every applicant is eligible, and those who are must be either homeless already or threatened with becoming so within 56 days, typically because they face eviction.
The prevention duty entails drawing up a plan to help households in question to avoid becoming homeless in the first place. The relief duty requires councils to take “reasonable steps” to help the homeless to secure accommodation for at least six months. It is when such relief does not promptly occur that TA has to be found. A July 2024 House of Commons library briefing describes local authorities’ duties as follows:
“If attempts to relieve someone’s homelessness are unsuccessful and the applicant is assessed as being eligible for assistance, ‘unintentionally’ homeless and in priority need, the local authority must ensure that suitable temporary accommodation is available for the applicant and their household.”
In theory, councils can turn to the local private rented sector (PRS) when seeking TA. In practice such solutions are becoming rare. The overall amount of PRS dwellings in London has reduced dramatically – in the first quarter of 2023, the number had shrunk to about 60 per cent of the pre-pandemic average. And those PRS properties that remain have become less available for TA, as landlords who might have let to homeless households in the past have stopped doing so. There are, after all, plenty of other potential tenants willing and able to pay London’s rocketing rents.
The dearth of PRS options has meant boroughs turning more and more to the main alternative – bed and breakfast. In homelessness regulations, B&B can mean any sort of accommodation that isn’t fully self-contained – in other words, that doesn’t come with its own cooking and bathroom facilities. That could be a hostel for the homeless, but usually it means booking rooms in commercial hotels, such as Premier Inn or Travelodge.
The demand for TA is now such that boroughs’ use of B&Bs has gone through the roof. A London Councils report published in October says that in April 2022 “only 295 families were placed in B&Bs”, but that two years later figures gathered from 27 of the 32 boroughs showed that number to have risen massively, to 2,249.
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When your council finds you somewhere to live on a temporary basis you are supposed to accept it even if it doesn’t meet all of your needs, and also pay for it: “You are responsible for the weekly rent for whatever type of temporary accommodation we provide for you,” says Hammersmith & Fulham; “You will receive only one suitable offer,” says Waltham Forest, and adds: “You are responsible for paying your rent.”
In order to do that, many homeless households depend on housing benefit. Councils are the payers of that benefit. They are later reimbursed by the Department for Work and Pensions (DWP), but not for the full amount. The difference between the TA-generated sum councils can claim from the DWP and the sum they spend has got bigger and bigger, accelerated in London by the booming reliance on B&Bs.
This change has been, in the words of the London Councils report, “a fundamental driver” in a huge rise in borough spending on homelessness services overall. Councils all over England have had to deal with the same thing, but the position is at its most extreme in the capital.
National government figures show that in the financial year 2023-24, London boroughs spent a total of £1.6 billion on homelessness services of all kinds. That includes the extraordinary figure of around £4 million a day on TA.
However, as the London Councils report points out, the impact on borough budgets is more clearly shown by the net spending figures – that difference between what the boroughs shell out and what the DWP later gives them to help make up for it.
In 2010-11, coinciding with the start of the long spell of Conservative-led national government, London boroughs spent a net total of £160 million on all homelessness services, including £54 million on TA. By 2023-24, the overall net London figure had hit £750 million, of which a huge £559 million went on TA.
Even allowing for inflation, those are very big increases over those 13 years, with the proportion of net homelessness spending going on TA also greatly increasing. Strip out the TA sub-division for nightly-paid, short-term B&B arrangements and find the £1.3 million spent on this in 2012-13 had hit no less than £207 million in 2023-24.
All of this net spend on homelessness could have been used by councils for something else – street-cleaning, libraries or schools. No wonder, then, that London Councils is describing the overall homelessness costs it must now meet from within its own budgets as “posing the fastest-growing risk to boroughs’ financial stability”, with TA the most alarming element.
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The scariest thing of all is that by far the steepest part of the long upward TA costs path has come very recently. Net overall spending on London homelessness in 2023-24 was almost 50 per cent higher than it had been in 2022-23. And 68 per cent of that nearly 50 per cent went on TA.
Why the sudden hike? For London Councils, the growth in TA pressures in general can be “directly traced” to two roots causes: one, “the national failure to build enough new homes”; two, the “unintended consequences of uncoordinated government policy objectives”.
The latter relate in part to the pandemic. In March 2020, as part of its emergency measures, the government ordered a ban on evictions. That eventually ended in May 2021 and was followed by a spike in the number “no fault” evictions, with London seeing the highest rate.
The trend was strengthened by the simultaneous effects of the cost-of-living crisis hitting incomes, and by PRS rents rising to 20 per cent above their pre-Covid levels, according to research for London Councils and others by Savills and the London School of Economics, published last year.
On top of all that, from March 2020 until April 2024, the rates of Local Housing Allowance (LHA), which determine levels of housing benefit entitlement in different “broad rental market areas”, had been frozen by the government. The effect was to make fewer and fewer PRS homes affordable to more and more households.
LHA had previously been set at a level that meant the cheapest 30 per cent of PRS homes would be within the range of housing benefit claimants. The impact of the freeze was such that, according to the Savills-LSE research, by 2020-21 only 19 per cent PRS properties listed on Rightmove were affordable to those needing housing benefit to pay their rent. And by 2022-23, the figure had plunged to just 2.3 per cent.
In November 2023, the then Chancellor Jeremy Hunt announced that from April 2024, LHA rates would be increased to restore coverage of the cheapest 30 per cent of PRS properties. This, he said, was because “cost of living pressures remain at their most acute for the poorest families”, a consideration he placed above “the concern some have about the effect on work incentives of matching benefit increases to inflation”.
However, London Councils is not alone in saying that although this change helped, its impact has been limited in the context of PRS rents rising so fast. And the new Chancellor, Rachel Reeves, did not increase LHA levels in her autumn budget.
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In view of all of the above, a combination of trends, policies and events that has graduated from crisis to emergency to potential catastrophe, it isn’t a surprise that Claire Holland’s response to the new local government settlement expressed particular concern about a vital component of the funding, the ringfenced homelessness prevention grant.
This, too, is to go up compared with last year – by about £80 million for London’s boroughs – but it has come with a new string attached – a ringfence within the ringfence. This states that 49 per cent of every English local authority’s grant allocation must be spent on its prevention and relief duties (including staffing) and “may not be spent on temporary accommodation”, leaving at most 51 per cent for spending on TA.
The problem for London is that, as the Ministry of Housing. Communities and Local Government chart below shows, in 2023-24, it spent 60 per cent of its homelessness prevention grant on TA, far more than anywhere else.
London Councils says it favours a greater focus on “prevention and relief”, but, unsurprisingly, Claire Holland has warned that “resources for temporary accommodation [are] being squeezed” in the capital.
The new local government settlement as a whole implies an overall, collective London boroughs’ budget shortfall of £500 million over the next financial year. That is a smaller figure than the expected £700 million overspend by the end of the current one. But that £700 million includes £270 million more spent on homelessness than originally budgeted for, putting it right up there with adult and children’s social care on £300 million.
If homelessness keeps increasing in 2025, the TA bill will too, and the strain on general spending will increase. Holland has warned more than once that several boroughs face the prospect of joining the list of local authorities that have run out of money.
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With the growing financial stress comes the human variety. The shortage of TA makes it more likely that boroughs will have to look beyond their own boundaries to find it. Islington, for example, is very candid about this. “Most temporary accommodation is from the private sector and outside the borough,” its website says.
Of itself, this is far from new. It has long been commonplace for boroughs to “export” their homeless to London neighbours, sometimes those next door but sometimes to different parts of the capital. An agreement to reduce competition between boroughs for scarce TA has been in place since 2011.
Such migrations can be desirable, at least to some degree, if they take someone well away from domestic violence or some form of threat. They might even, if decent permanent housing can then be found in that new location, provide a beneficial fresh start. In many more cases, though, they strain or sever connections with familiar neighbourhoods close to places of work, schools and medical care and to family and friends.
Moreover, many TA placements are not only out-of-borough but out of London altogether, sometimes a long way out. Since at least 2013, some homeless Londoners have been sent by their home boroughs to temporary dwellings in the midlands or north of England. Before long, such scenarios were woven into the fabric of housing crisis culture: a lone mother forced to move reluctantly from London to Newcastle was a character in Ken Loach’s polemical 2016 film, I, Daniel Blake.
London Councils says that for some years about eight per cent of all homeless placements have been outside of Greater London, with the great majority of households going to counties bordering the capital. In the case of outer London boroughs, that distance might not be very far. But the out-of-London figure has lately jumped to 12 per cent, underlining that London’s homelessness problem is, more and more, a national problem too.
The most recent spotlight on the issue has been shone by Grahame Morris, the Labour MP for Easington in County Durham. In November, he claimed in the House of Commons that numerous vulnerable families had been “pressured” by London boroughs, including Redbridge, Hillingdon and Enfield, into accepting temporary accommodation in his constituency. A local newspaper has been covering the arrival of London families, highlighting additional requirements this places on local services.
Morris said the actions of some local authorities in doing this were illegal. He did not quite specify what he meant by that, but a local authority sending a homeless household to another one has responsibilities, some of them set down in law, to inform the receiving authority.
The examples Morris had in mind are being looked into. A sympathetic stance on the issue as a whole is that London’s boroughs, like local authorities everywhere, are under enormous pressure. The London Assembly has been told that the arrangement between boroughs often breaks down simply because staff cannot keep up with the sheer number of cases they have to deal with.
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The proliferation of London homelessness, with all its deleterious effects, has a number of causes, some of them going back to the global financial crisis and beyond, and all of them adding up to an undersupply of housing especially at prices those at the lower end of the income scale can afford. It has also occurred in parallel with national government policies introduced 14 years ago.
As Chancellor of the Conservative-Liberal Democrat government, George Osborne introduced radical benefit cuts and caps, including a a sharp reduction from April 2011 in LHA rates from covering the lowest 50 per cent of local PRS rents to the 30 per cent which, today, looks bountiful.
This intervention by his party colleague alarmed even Boris Johnson when he was Mayor of London. Prior to its introduction, he expressed his disquiet in economic terms, telling the London Assembly in October 2010 of his “serious concerns about the potential unintended consequences for London of the changes to local housing allowance (LHA).”
He said he feared “the creation of no go areas in inner London for people on low incomes” with the “detrimental” effect of “many low paid workers doing essential jobs in the centre” having to “move out of inner London” and not being able to afford to commute to and from work.
That might be dismissed as a very Tory way of looking at it, but plenty would agree that Johnson’s worry about Osborne’s measures had merit. And if a different line of criticism is preferred, it is very close at hand.
A short stay in a Travelodge miles from the area you call home might make for a pleasant business trip or holiday, but few would chose to live in such a hotel long term. Those who end up doing so while waiting and hoping for somewhere proper to live aren’t meant to be there for more than six weeks.
Yet many find themselves holed up in one for months or even years, a situation that can be extremely harmful to the individuals concerned, especially, as is now frequently the case, if they are children. And the cost to those homeless people, to London’s boroughs and to the country is rising all the time.
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