Ahead of the Autumn Statement last year an emergency meeting was called by the District Councils Network to highlight the scale of temporary accommodation and the increasing financial pressure it was putting councils under. As a result of that meeting 119 councils signed a letter to the government calling for support. They called for an end to the freeze of Local Housing Allowance, for it to at least cover the bottom 30% of rentals, and a commitment to an annual increase.
One of the issues they highlighted was the ludicrous situation where the ‘temporary accommodation subsidy’ remained capped at 90% of the 2011 Local Housing Allowance rate. Worthing Council Cabinet member Emma Taylor explained how the increasing gap between providing temporary accommodation and the income to cover it had reached £3.9 million. This represented close to a third of their budget. The deficit has to be covered by a council’s General Fund. Worthing is one of many towns in which Right to Buy and stock transfer has left it without any council housing.
“Our example is replicated around the country. Local authorities are being starved of the funds required to deliver their statutory services. We need this subsidy to be unfrozen and brought in line with the actual cost of us housing people.”
Yet this growing gap between the cost of temporary accommodation and the income councils receive for it, impacts on metropolitan councils as well, including ones with their own council housing stock. For example, Bristol council reportedly faces a £17 million gap.
To have some measure of the scale of the financial loss faced by councils we sent in Freedom of Information requests to a cross section of local authorities with council housing. We also wanted to see to what extent councils were using their own stock for temporary accommodation. Some have acquired their own specifically for that purpose, some are using their regular stock. Of course, it is cheaper for councils to place homeless households in their own accommodation, so there appears to be a growing trend for them to do this. Whilst you can understand why they do, one impact of this is that people on the housing waiting lists will have to wait longer. And the big question is who pays for it?
Of 18 authorities that fully replied to our FOI (they have just over a quarter of the 109,000 households in temporary accommodation in England) slightly more than one in six households were in council accommodation.
Homelessness services have to be paid for from the General Fund. However, councils can build or acquire temporary accommodation through the Housing Revenue Account. If some of it sits in the HRA that means that instead of all residents paying for it, the cost falls on council tenants, who are, it is often forgotten, council tax payers as well. They are in effect making a double contribution.
In the case of Swindon the council has decided to build some temporary accommodation through the HRA, in order to save the General Fund money. Whilst it is true in this case that the rental income will go to the HRA, nonetheless, any debt associated with building or acquisition is paid for from the council tenants’ rent. This may impact on the funding available for maintenance of existing stock, because if the cost of servicing the debt is more than the rental income then that is borne by the HRA.
So what were the results of our FOI? Nine out of 18 respondents showed an increase in the cost of temporary accommodation of 50% or more over the year to March 2024, three of them over 100%. The increase in deficit – the gap between the actual costs and the income they receive – was more than 50% in the case of five of them , including Westminster 84%, Hillingdon 145%, and Exeter 337%.
The size of the deficit doesn’t have to be very big to have a significant influence on the budget of some councils, in particular, district councils. So although Exeter’s was less than a million, compared to Westminster’s £36 million, when your budget is not very large, it still presents a problem. If your budget is £20 million and you have a £600,000 increase in the cost of temporary accommodation in one year, that can obviously impact on other services.
Even in some cases where the cost hasn’t increased they can still be carrying a big deficit. For example Manchester. Despite their estimate for 2023/24 showing a fall of around 9%, they are still carrying a deficit of more than £22 million.
Just those 18 authorities had a collective deficit for 2023/4 of £219 million as compared to £168 million the previous year; a 30% increase. In addition, those councils which gave us partial information show big increases in the cost of providing temporary accommodation. For example
- Leicester’s costs increased from £4,354,442.98 to £8,041,496.77.
- Nottingham from £3,342,933 to £6,852,128.
- Crawley from £4,660,000 to £7,430.
- Slough from £8,486,613.84 to £15,404,053.81
- In the case of Newham they budgeted for £13.4 million in 2023/24 but the actual cost was £21.1 million.
- The cost for Southampton has more than doubled from £1,484,523 to £3,271,677.
The LGA has reported that one in five councils are in danger of having to issue a section 114 notice (indicating they won’t be able to balance their budget). One of the key factors driving that is the increasing cost of temporary accommodation. In October 2023 the LGA reported that £1.7 billion was being spent on it. The amount spent on hostels and B&Bs alone totalled £565mn in 2022-23.
LHA freeze?
There is an important practical question which the next government will have to answer very quickly. Although the LHA has been increased this year, Hunt’s austerity budget has programmed in a return to a freeze from next April. With Rachel Reeves saying that Labour will stick to Tory spending plans, that could mean imposing the freeze of LHA. We need a commitment that they won’t, otherwise more councils are likely to issue section 114 notices. The current government only prevented more councils from doing so by granting 19 of them Exceptional Financial Support. Contrary to the name, it is not support, but only permission to borrow or sell off assets.
One of the demands which it is necessary to place on the next government is not only an end to the 13 year freeze on the ‘temporary accommodation subsidy’ for councils but they should cover the actual cost of temporary accommodation which councils have to fork out. In the long term it doesn’t make sense to spend a fortune on it, but councils should not be financially penalised for the failure of central government policy. It is a problem which can only be resolved by significantly increasing the available social rent housing, not by maintaining it as a scarce resource.
Social rent homes
There is a widespread consensus today, including housing campaigns such as Shelter, tenant unions and the magazine Inside Housing, that we need at least 90,000 social rent homes a year. Inside Housing wrote to all the political parties calling for a commitment in the General Election to fund that amount at least. But as the April Inside Housing editorial says, “We’ve had warm words, but little commitment on numbers.” With the approach of the General Election Inside Housing says it will be stepping up the campaign, explaining why “social rent has to be a part of the picture”.
We agree wholeheartedly. Regrettably, as a campaign of Labour Party members we are greatly disappointed that Shadow Housing Minister Matthew Pennycook has said that such a target is “unfeasible”. A Labour government will not increase the current government’s parsimonious funding in its Affordable Homes Programme, he has told us. This is unacceptable. It would mean that the huge amount of money wasted on temporary accommodation and LHA in the private rented sector will continue. We know that many people are spending years in temporary accommodation and are forced to move away from their communities because of the acute shortage of council homes.
Under far worse economic conditions than we face today, the Atlee government, with a debt to GDP ratio of 270%, made a council housing programme their first housing priority. Health Minister Anueran Bevan tripled the grant and increased it from 40 to 60 years. In response to demands on the 1945 government Bevan said:
“Dissatisfaction with the government is the real dynamic of democracy, the elemental force of political action. How on earth can people be satisfied when the lack of houses is such a fertile source of human misery?”
The Atlee government was pressured by the widespread squatters movement. Today, the shortage of good quality social rent homes is once again “a fertile source of human misery”. Pressure needs to be brought to bear on the new government to take the action necessary to begin to begin to resolve the housing crisis. It will not be done without a renaissance of council housing. The 109,000 households in temporary accommodation and the more than 1.2 million households on housing waiting lists are not about to get mortgages. They need secure tenancies to rescue them from the private rented sector.
Martin Wicks, Secretary Labour Campaign for Council Housing
Table: Temporary Accommodation
| Households in TA | In council accom | Cost 23/24 | Income 23/24 | Deficit 23/24 | Cost 22/23 | Income 22/23 | Deficit 22/23 | |
| Brent | 1,979 | 20 | £37,297,184.76 | £14,254,643.56 | £23,042,541.20 | £31,003,624.11 | £15,835,488.65 | £15,168,135.46 |
| Bromley | 1,640 | 72 | £18,860,000.00 | £9,820,000.00 | £9,040,000.00 | £21,224,000.00 | £12,250,000.00 | £8,974,000.00 |
| Cornwall | 790 | 181 | £18,567,703.68 | £4,443,392.50 | £14,124,311.18 | £18,401,941.16 | £7,111,590.23 | £11,290,350.93 |
| Coventry | 1,158 | 121 | £26,923,645.00 | £15,118,484.00 | £11,805,161.00 | £17,723,993.00 | £8,629,789.00 | £9,094,204.00 |
| Dover | 321 | 130 | £2,186,033.00 | £545,628.00 | £1,640,405.00 | £1,684,807.00 | £536,501.00 | £1,148,306.00 |
| Exeter | 31 | 10 | £2,109,519.00 | £1,307,099.00 | £802,420.00 | £1,407,707.00 | £1,224,265.00 | £183,442.00 |
| Haringey | 2,645 | 364 | £33,729,720.00 | £24,728,141.00 | £9,001,179.00 | £35,322,217.00 | £27,751,225.00 | £7,570,992.00 |
| Hillingdon | 1,070 | £12,780,766.00 | £5,517,487.00 | £7,263,279.00 | £6,088,612.00 | £3,129,134.00 | £2,959,478.00 | |
| Islington | 1,252 | 424 | £16,431,412.99 | £9,467,462.51 | £6,963,950.48 | £13,641,999.73 | £5,154,816.07 | £8,487,183.66 |
| Leeds | 218 | 0 | £2,745,810.00 | £636,293.00 | £2,109,517.00 | £2,264,880.00 | £393,358.00 | £1,871,522.00 |
| Lincoln | 47 | 27 | £618,731.00 | £150,301.00 | £468,430.00 | £693,530.00 | £127,477.00 | £566,053.00 |
| Manchester | 2,800 | 403 | £40,185,303.00 | £17,477,392.00 | £22,707,911.00 | £43,608,000.00 | £18,861,000.00 | £24,747,000.00 |
| Portsmouth | 528 | 0 | £7,756,000.00 | £4,546,000.00 | £3,210,000.00 | £7,577,000.00 | £4,553,000.00 | £3,024,000.00 |
| Reading | 403 | 257 | £4,739,552.00 | £2,571,490.00 | £2,168,062.00 | £3,633,936.00 | £2,081,531.00 | £1,552,405.00 |
| Southwark | 4,471 | 1,317 | £44,024,898.00 | £36,865,547.00 | £7,159,351.00 | £42,699,720.00 | £38,372,741.00 | £4,326,979.00 |
| Tower Hamlets | 2,986 | 540 | £81,858,645.00 | £39,768,283.00 | £42,090,362.00 | £76,546,285.00 | £43,532,241.00 | £33,014,000.00 |
| Wandsworth | 3,481 | 1,148 | £42,305,504.18 | £23,600,000.00 | £18,705,504.18 | £37,612,124.55 | £23,500,000.00 | £14,112,124.55 |
| Westminster | 3,498 | 80 | £93,195,463.42 | £56,253,527.87 | £36,941,935.56 | £59,425,301.34 | £39,396,634.75 | £20,028,666.59 |
| Total | 29,318 | 5,094 | £486,315,891.03 | £267,071,171.44 | £219,244,319.60 | £420,559,677.89 | £252,440,791.70 | £168,118,842.19 |
These councils have just over a quarter of the 109,000 households in TA. Whilst it’s difficult to accurately extrapolate to the whole stock, it would be safe to say that the deficit on TA is probably somewhere in the region of £500-£800 million just for English councils that still have council housing stock.
Labour Campaign for Council Housing 