London councils pay landlords £14m in 'incentives' to house homeless people

Cash-strapped London councils are paying private landlords more than £14m a year in “incentives” simply to persuade them to house homeless people, the Guardian can reveal.

The sweetener payments of up to £8,300 each were made to landlords more than 5,700 times in 2018 to house people who were either homeless or considered at risk of homelessness, freedom of information requests have revealed. The payouts are made in addition to rent and have been branded as ludicrous by housing campaigners and intolerable by councils.

The fall in social housebuilding and a widening gap between housing benefit and market rents appear to be fuelling the payments. Barnet, in north London, paid out £1.5m last year while facing a £23m overall budget cut, saying the payments were important in securing housing at times of high demand. In the past five years, the borough has built only 20 council houses.

Hillingdon, Haringey and Barking and Dagenham also spent more than £1m each. Barking and Dagenham said the payments were needed to “ensure our most vulnerable people are housed in the borough, and in the long run save money”. It has lost 48,500 council homes under right-to-buy policies and now spends more than £800,000 a year renting back sold-off properties. Ealing, which spent £770,000 on incentives, said it saved the council money by keeping people out of shabbier but more expensive emergency and temporary accommodation.

Money paid by London councils to private landlords, and number of social homes built

“It is ludicrous councils have to resort to handing out cash sweeteners to secure housing for desperate families, when there’s a much more sustainable solution: build social housing on an ambitious scale,” said Polly Neate, the chief executive of the Shelter housing charity, which is campaigning for a national social housing programme for 3.1m homes.

Landlords said the payments compensated for accepting homeless tenants who were more likely to fall behind on their rent, especially if they received universal credit which makes payments at least a month in arrears.

But they criticised the system, admitting it could be “a waste of money”. David Smith, the policy director at the Residential Landlords Association, said: “Councils should be focusing more on supporting tenants [so they don’t become homeless]. Bribing people isn’t the answer. You end up with people taking tenants who don’t really want them and then evicting them later.”

Councils claimed some landlords played different boroughs off against each other to increase payouts and that the system was vulnerable to abuse. It operates nationwide, but London accounts for almost 70% of the total number of homeless families in England, according to the figures obtained by housing campaigner Nye Jones.

Jones said: “The government’s decimation of social housing stock, together with the punitive benefits freeze and its refusal to address the growing issue of evictions, has created an environment where some private landlords are using a council’s desperation to pocket huge cash incentives just to rent their property out.”

The shadow housing secretary, John Healey, said the payments were “a consequence of local councils being forced to pick up the pieces of a homelessness crisis made in Downing Street”. He urged ministers to “build more low-cost homes, fix universal credit and give renters stronger rights”.

Cllr Darren Rodwell, the housing lead at London Councils, said the level of payments was “a symptom of London’s broken housing market”.

“At a time when our funding from central government has been reduced by 63% since 2010, we would much rather be investing in frontline services,” he said.

London councils are setting up a joint body, Capital Letters, to procure housing using collective bargaining and to reduce competition between councils for the same homes. Barnet said it was starting to build more affordable housing and had completed 144 for affordable rent.

The housing and homelessness minister, Heather Wheeler, said: “Local authorities have a duty to house vulnerable people who are homeless, and can provide incentives to private rented-sector landlords. We want to do everything possible to ensure that people are properly housed, as no one is meant to spend their lives on the streets.”