Councils urge government to bridge homelessness funding gap

Local councils across England are urging the government to shoulder more of the escalating costs of housing homeless individuals, according to sources. The appeal comes amid a sharp rise in homelessness and associated expenses, leaving councils struggling to bridge funding gaps.

Currently, local authorities bear the initial costs of providing temporary accommodation and then claim reimbursement from central government. However, the Local Government Association (LGA), which represents councils across England, highlights that a 2011 cap on reimbursements has left councils £737.3 million short over the past five years. This funding gap has diverted resources from critical areas such as adult social care, children’s services, and homelessness prevention.

The LGA has called on the Labour government to update the system to reflect 2024 costs, arguing that the current model is unsustainable given the rising demand for temporary accommodation and skyrocketing housing costs. Official data revealed a record 123,100 households in temporary accommodation as of June 2023, a 16% increase from the previous year.

Since 2011, soaring rent costs have made affordable housing increasingly difficult to secure, leaving councils struggling to find suitable accommodations within their budgets. The constrained housing market has forced many to rely on expensive temporary solutions, including hotels and bed-and-breakfasts, to support those in need. These short-term measures have further strained already limited financial resources, underscoring the urgent need for more affordable housing options. The growing reliance on costly alternatives highlights the pressing challenge of addressing housing shortages and ensuring that councils can provide sustainable and long-term solutions for vulnerable individuals and families.

The funding shortfall stems from a cap introduced in 2011, which limits the amount councils can claim to 90% of the Local Housing Allowance (LHA) rate at the time. Despite significant increases in housing costs, the cap has remained frozen.

The LGA reported that the funding gap has doubled, from £104.5 million in 2018/19 to £204.5 million in 2022/23, with areas like London, Manchester, and Newham hardest hit.

Matt Downie, CEO of the homelessness charity Crisis, highlighted the growing challenges faced by councils as rising living costs and high rents push more people into homelessness, leaving local authorities reliant on costly and often unsuitable temporary accommodation options.

Labour has committed to addressing the housing crisis with plans to build 1.5 million homes in five years and launch a cross-government homelessness strategy. Despite this, many councils remain doubtful about the practicality of these ambitious pledges.

In the meantime, councils are pressing for urgent action, emphasizing the need for a fair distribution of financial responsibilities between local authorities and the national government. The Department for Work and Pensions maintains that the housing system they inherited is deeply flawed, asserting their commitment to significantly increasing affordable housing and ensuring a fair and sustainable social security system.

With the total cost of temporary accommodation reaching £1.75 billion in 2022/23, councils are calling for urgent reforms to address the root causes of homelessness and ease the growing financial strain on local authorities.