London Councils estimates £740m temporary accommodation shortfall across capital

The research, published this week (13 October), found that eight London boroughs spent a combined £543m on temporary accommodation in 2024/25.

However, the amount national government reimburses councils’ temporary accommodation spend has been frozen for 14 years.  

London Councils said: “Consequently, only a portion of the £543m spent was offset by the government’s housing benefit subsidy and other dedicated funding streams – leaving a shortfall of £223m, which had to be met from boroughs’ already stretched budgets.”

The report warned that that if this pattern holds across all boroughs, the citywide annual shortfall will exceed £740m.

Local authorities have a legal duty to provide temporary accommodation to homeless households qualifying for support under housing law.

London Councils noted: “The widening gap in boroughs’ spending on temporary accommodation and the funding it receives from government is further compounded by rising costs in London’s private rented sector, where the majority of temporary accommodation must be sourced.”

Meanwhile, the research found that two-thirds of Londoners living in temporary accommodation are families with dependent children – many of whom are placed in poor-quality, overcrowded homes, often far from their schools and support networks. 

In light of its findings, London Councils made the following recommendations for Government:

• Increase Housing Benefit support for temporary accommodation - "The housing benefit subsidy for temporary accommodation has been frozen since 2011 whilst rental costs have risen significantly, representing a direct cost shunt from the DWP to council taxpayers. Raising the subsidy to match current Local Housing Allowance (LHA) rates would bring much-needed funding into councils and help close the growing gap between income and expenditure."
• Boost Local Housing Allowance rates across the board - "LHA rates also need to increase more widely to reflect the true cost of private rents. Too many low-income Londoners are struggling to find homes within LHA limits, putting them at risk of homelessness and adding pressure to temporary accommodation services."
• Provide capital funding for councils to build or buy homes - "Instead of paying unsustainable amounts to private landlords, government should invest in council-led housing. Giving boroughs capital funding to build or acquire properties would improve both the quality and value of temporary accommodation – and help meet long-term housing needs."

Cllr Grace Williams, London Councils’ Executive Member for Housing and Regeneration, said: “Boroughs are doing everything they can to support homeless families, but the system is buckling under the strain. The housing benefit system has failed to keep pace with reality – and councils are paying the price. We urgently need government to step in with emergency funding and long-term reform to prevent more families falling into homelessness and more councils facing financial collapse.” 

Last month, Local Government Lawyer published the findings of research into the temporary housing crisis, in association with law firm Devonshires and the Temporary Accommodation Network. 

The research, based on a survey of housing lawyers and other housing professionals, examines the extent of the problem, analyses the factors behind it and outlines a number of solutions currently being deployed in different parts of the country. To access the report, please click here.

Homelessness Minister Alison McGovern said: “You can’t have a decent life without a decent home. Whether it’s rough sleeping or sofa surfing or, at its worst, children stuck in B&Bs, homelessness in the UK has been too high for too long.

“This has to stop. Through our Plan for Change, the UK will build homes and get help to those who need it to put a roof over their head.

“We’re providing extra cash now to address a crisis made over the past decade.  Both the government’s £39bn to build social and affordable homes and the Child Poverty Strategy to come will tackle the root causes of this problem, but we need action now to stop homelessness getting any worse.”

Lottie Winson