The cost of putting homeless people in temporary accommodation has soared by 25% for London councils in the past year as landlords sell up or choose private tenants, Sky News can reveal.
Some councils in the capital are facing potential bankruptcy as the growing demand for homelessness services alongside increasing accommodation costs has meant local authorities have had to dig into their own coffers as there is not enough government funding to cover their costs.
New figures show in the year up to April 2024 London boroughs overspent on their homelessness budgets by £208m, according to data from London Councils, which represents the capital’s local authorities.
A total of 29 out of London’s 33 boroughs have overspent on their homelessness budget as they dip into money meant for other services.
In many cases, homelessness spending is the key financial challenge and could tip councils into bankruptcy.
The amount of money that councils can claim from the government for temporary accommodation costs has been frozen at 2011 rates, despite it becoming more expensive and more London boroughs relying on pricey B&Bs and hotels.
London has the most severe homelessness crisis in the country, accounting for 57% of England’s total number of homeless households living in temporary accommodation, government data shows.
In the year up to April 2024, those living in temporary accommodation in London rose by 10% to 60,959, new data from London Councils shows.
And the number of families placed in B&Bs – an unsuitable solution financially and socially – has risen by 25% to 2,249 families.
London has more than half of England’s homeless population
Landlords selling up or privately renting
As well as a rise in homelessness, the main issue for rising costs is a chronic shortage of affordable accommodation.
In the first quarter of 2023, there were 41% fewer London rental properties available than the pre-pandemic average, compared with 33% fewer nationally.
Private landlords have increasingly cancelled their agreements with councils to either rent to private tenants or sell up.
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The number of notices to leave those arrangements received by boroughs from September 2022 to April 2024 was more than 10,000 – a loss of 18% of London’s total temporary accommodation stock.
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Newham facing bankruptcy
The east London borough of Newham is one of the councils facing bankruptcy if it does not receive support from the government.
A report published this week showed Newham Council was £22.2m in the red at the end of the 2023-24 financial year and would have remained within its budget if it had not had to top up its homelessness funding.
It has allocated a further £18.5m to its temporary accommodation budget for the 2024-25 year but estimates show costs could top £40m.
The council said it has taken a “prudent approach” to dealing with budgetary challenges.
But Councillor Zulfiqar Ali, lead member for finance, said: “It won’t be enough, because we haven’t failed in our financial management and homelessness approach.
“Rather, past government policies and the inefficacies of the housing market in London and the UK have failed us.
“That’s why it will be essential to take urgent and vital choices, and some form of government assistance may also be required.”
Landlords are selling up or turning to private tenants. Pic: iStock
Calls for government help
London Councils has called for an emergency homelessness funding increase from the government and to remove the temporary accommodation government subsidy cap.
The group also wants the government to allow councils to buy more homes sold by private landlords to use for temporary accommodation.
And it has called on the government to make homelessness a “major priority”, with departments working together.
A spokeswoman from the ministry of housing, communities and local government told Sky News: “Homelessness levels have sky-rocketed and too many families are living in temporary accommodation in London, and across the country.
“Fixing the housing crisis is our priority. We are taking action to tackle the root causes of homelessness, including delivering the biggest increase in social and affordable housebuilding in a generation and abolishing Section 21 ‘no fault’ evictions.
“We will take the action needed to tackle this issue and develop a long-term, cross-government strategy working with mayors and councils to put Britain back on track to ending homelessness.”