Local councils in England are caught in an escalating crisis of homelessness and unaffordable emergency housing costs, with a growing funding gap that risks pushing council services to the brink. Data from the Local Government Association (LGA) reveals that councils face a shortfall of £266 million between the cost of housing people in temporary accommodation and the funds they can reclaim from the Department for Work and Pensions (DWP). This shortfall has ballooned by 30% in just one year and is symptomatic of a broader crisis related to England's chronic shortage of affordable social housing.

Councils must pay upfront for temporary accommodation, increasingly provided by private-sector landlords who charge rents far above the Local Housing Allowance (LHA) rates from 2011. However, the reimbursement councils receive from the DWP is capped at 90% of these outdated LHA rates, despite rents having soared over the past decade. This disconnect means councils are effectively subsidising emergency housing costs out of their own shrinking budgets. Over the last six years, this cumulative shortfall has surpassed £1 billion, a figure highlighted by the LGA in its calls for urgent reform of the subsidy system.

The shortage of social housing and reliance on expensive private temporary accommodation have contributed to record numbers of homeless households. Recent figures show there are over 131,000 households living in temporary accommodation across England, including 83,150 with children, up by more than 11% year-on-year. Many families remain stuck in emergency housing far longer than intended—sometimes for years—due to the lack of permanent affordable homes, often living in unsuitable spaces such as converted office blocks or shipping containers.

Councils in London are facing acute pressures, spending some £90 million monthly on temporary accommodation, a rise of nearly 40% in a year. The situation has led some councils to declare financial distress or approach bankruptcy after years of funding cuts. Councillor Fleur Donnelly-Jackson of Brent Council described the urgency of the issue, pointing out that over 3,000 children in Brent sleep in temporary accommodation every night, disrupting their schooling and family stability. She lamented that councils are "plugging the gap left by a subsidy system that pays us back at 2011 rent levels, while we face 2025 rents," likening it to "paying today’s bills with yesterday’s wages."

The net effect is a vicious cycle where councils face soaring temporary accommodation costs while having static reimbursement rates, diverting critical funds from broader homelessness prevention and social services. The LGA also reports that a recent change to the allocation of the Homelessness Prevention Grant has increased councils’ financial burdens by an additional £76 million, straining their ability to address rising homelessness levels effectively.

Experts and local authorities argue that failing to invest adequately in affordable social housing is a false economy, as the cumulative expense of emergency accommodation far exceeds the cost of providing secure, affordable homes. For every pound spent on temporary housing, councils lose the opportunity to build or maintain long-term solutions that could reduce homelessness sustainably. Increasing the Housing Benefit subsidy to reflect current rent levels and removing funding ringfences are among the recommended policy changes to provide councils with the financial flexibility necessary for early intervention and housing solutions.

These financial pressures come amid rising homelessness driven by soaring private rents, stagnation in housebuilding, and increased eviction rates. Government officials, including Housing Minister Matthew Pennycook, have noted some "green shoots" in new housing starts, which have risen by 29% compared to last year, including a 28% rise in affordable homes started by housing associations. However, these improvements remain small relative to the scale of the housing crisis. The government’s commitment to building 1.5 million homes and banning no-fault evictions aims to address long-term causes of homelessness, but the immediate funding gap for temporary accommodation remains a critical and growing crisis for councils nationwide.

In summary, councils are struggling to keep pace with the escalating costs of housing England’s homeless population due to a subsidy system anchored to a decade-old rental baseline, the scarcity of affordable housing, and rising demand. Without urgent government intervention to reform accommodation subsidies and boost social housing supply, councils may be forced to make untenable choices between funding frontline services and meeting the immediate housing needs of vulnerable families.

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Source: Noah Wire Services