Debt-ridden council spends 49% of taxpayer cash on housing homeless people

Councils have warned they are increasingly facing bankruptcy over the rising cost of preventing homelessness, with one already spending nearly half of its budget on temporary accommodation, an emergency meeting was told.

Cross-party leaders and senior figures from more than 50 councils at a meeting in London on Tuesday collectively called on central government to step in and help them with these costs. Among them was Councillor Stephen Holt, leader of Eastbourne Borough Council, who said he was "appalled by the speed of which this social and financial crisis has developed".

"Five years ago in Eastbourne, our 2018/19 spending on temporary accommodation was £1.4m. The figure this year is approaching £5m," he said. "We did some research. For every £1 we collect presently in council tax for Eastbourne Borough Council, 49p is spent on temporary accommodation.

"I’ll repeat that just to let it sink in: 49p in every £1 we collect in council tax is going on temporary accommodation. This is Eastbourne, a relatively small borough council, spending practically half of every pound on temporary accommodation and I know there are many others across England with even greater funding challenges."

According to research published last week, Eastbourne Borough Council's debt stands at £113 million - though the local Conservative group insists it stands as high as £181 million.

Calling on Westminster to prevent a "national crisis", Collr Holt said: “Simply put, without government intervention to tackle the tremendous cost of temporary accommodation and homelessness, the next step for many councils of all stripes is emergency budgets and section 114 [bankruptcy] notices.”

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Cllr Holt insisted that the issue is not a political one and called on the government to immediately uprate the housing benefit subsidy cap for temporary housing placements. This benefit, which councils receive when they house a family in temporary accommodation, has remained frozen at 90% of the local housing allowance (LHA) rate of 2011.

Senior councillors from other authorities raised similar concerns, with one warning of a catastrophic impact on the entire local government system.

Labour leader of Crawley Borough Council, Michael Jones, said: “This crisis in temporary accommodation is a challenge that would have been insurmountable even for the most well-resourced councils at the best of times, so I don’t think it is over-dramatic given the pressures facing councils to tell the government that they are presiding over the end of local government if they fail to take the urgent action needed.”

This week more than 40 Conservative backbenchers signed a letter to Rishi Sunak, warning that without emergency cash, many councils will be forced to cut crucial frontline services and hike council tax in an election year. The prime minister is already facing gloomy electoral prospects as Labour storm ahead in the polls, while the Tories leak voters to Reform UK.

A Department for Levelling Up, Housing and Communities spokesperson said: “We recognise councils are facing challenges and that is why we have announced a £64 billion funding package – an above-inflation increase at an average of 6.5% – to ensure they can continue making a difference, alongside our combined efforts to level up.”

'One in 50 Londoners homeless'

The UK's capital may be home to plenty of wealth, but its homelessness crisis is becoming increasingly unmanageable. Research by London Councils in 2023 showed one in 50 Londoners were homeless and living in temporary accommodation.

"We estimate there are almost 170,000 homeless Londoners living in temporary accommodation. This figure includes over 83,000 children, meaning on average at least one child in every London classroom is homeless," the association said in its report.

The group said the number of people in the capital entitled to homelessness support had risen by 15.2% between April 2022 and April 2023, while the number of people placed in B&B accommodation due to a lack of suitable housing increased from 1,543 to 3,242 during that period – an increase of 110%.

London Councils estimated that boroughs were collectively spending £60m each month on temporary accommodation costs, and predicted their combined net deficit to reach £244m in 2023-24 – up by 37%. The group pointed to a sharp fall in private listings since the COVID-19 pandemic as a major factor.

What will happen if we don’t fix the housing crisis?

The National Housing Federation (NHF) paints a bleak picture of what could happen if this crisis isn't resolved.

Based on its research, it predicts that the number of children living in temporary accommodation will rise from 131,000 to 310,000 by 2045. It says social housing waiting lists will grow to 1.8m households by 2045 – an increase of more than 50%.

The federation estimates that by 2045, 5.7 million households will be paying a third of their income on housing costs. It warns that the number of people experiencing homelessness could more than double, reaching 620,000 by 2045.

It also warns that by that same year, around 2.3 million people will be in poorly suited homes, for example ones that don't meet their disability needs, and that there will be a 350,000 home shortfall of retirement and supported housing. The NHF has suggested a long-term plan of action, which includes increased grant funding and other incentives to enable housing associations to build a "new generation" of social and affordable homes.

It also calls for a more skilled workforce, innovation in the construction industry, clear national standards to improve England's "old and leaky homes", and an "effective and revitalised planning system which is accountable and delivers more affordable, low carbon housing".

The NFH also suggests using the tax system to shape supply, demand and quality – for example reducing overseas investment in UK homes, and creating incentives for investors to improve the quality and energy efficiency of existing homes.