London’s worsening homelessness emergency represents the “single biggest risk” to boroughs’ finances, pushing town halls towards bankruptcy, warns London Councils.
The cross-party group’s analysis estimates that skyrocketing numbers of homeless Londoners and spiralling temporary accommodation costs forced boroughs to overspend on their homelessness budgets by at least £330 million in 2024-25, a 60% increase on their original plans.
Local authorities have a legal duty to provide temporary accommodation to qualifying homeless households, making it impossible to place strict limits on homelessness expenditure. The growing mismatch between temporary accommodation costs and government subsidies exacerbates the financial strain. In 2023-24, the gap was around £96 million, but it is estimated to have reached £140 million in 2024-25, a 45% increase.
London Councils fears that if current trends continue, more boroughs will need emergency government support and may risk issuing Section 114 notices, effectively declaring bankruptcy.
Key points highlighted by London Councils include:
- London boroughs originally allocated almost £600 million to their homelessness budgets for 2024-25.
- The number of homeless Londoners requiring temporary accommodation has reached a record high of 183,000, or one in 50 residents.
- Boroughs collectively spend £4 million daily on temporary accommodation, with costs spiking due to landlords ending arrangements and increased use of expensive nightly paid accommodation.
- Boroughs are expected to spend over £900 million on homelessness in 2024-25, an overspend of at least £330 million and a 40% increase compared to 2023-24.
- The ‘temporary accommodation housing benefit subsidy gap’ has expanded to £140 million, creating significant financial strain.
London Councils has called for urgent national policy action in the Spending Review to reduce homelessness pressures, including more financial support for boroughs and additional investment in affordable housing. The government’s Spending Review in June will determine future investment levels in public services, and a new national strategy on homelessness is being prepared.
London Councils has urged the government to:
- End the fourteen-year freeze on the amount local authorities can claim back for temporary accommodation costs.
- Make the increase in Local Housing Allowance rates permanent and update them annually to track inflation.
- Progress work on a national cross-departmental strategy to reduce homelessness.
- Boost long-term grant funding for affordable housing to address the chronic shortage driving the homelessness emergency.
Commenting on this threat Cllr Grace Williams, London Councils’ Executive Member for Housing and Regeneration, said:
“The worsening homelessness emergency is devastating the lives of too many Londoners and represents the single biggest risk to boroughs’ finances.
“Homelessness spending is fundamentally driven by factors outside our control. Boroughs have a legal duty to provide homelessness support – and we’re seeing homelessness numbers skyrocket while accommodation costs spiral.
“If things carry on as they are, we will see more boroughs’ become effectively bankrupt. This brings massive uncertainty to the future of our communities’ local services, and could ultimately mean more costs to the government when emergency interventions are required.
“London boroughs are doing everything we can to turn this situation around, but we need urgent action from ministers. Only national government has the powers and resources required to bolster councils’ budgets and reduce homelessness pressures – particularly through investing far more in affordable housing.”
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