Councils are facing an additional £76 million shortfall in their temporary accommodation budgets following changes to the allocation of the Homelessness Prevention Grant, new analysis from the Local Government Association shows.
This funding gap exacerbates the already significant financial challenges for councils, as they try to meet the growing demand for homelessness services. It comes as new figures released today show that on 30 September 2024, 126,040 households were in temporary accommodation, which is an increase of 15.7 per cent from a year before.
As the Spending Review approaches, the LGA is highlighting that without sufficient resourcing, councils are having to plug the finance gap in order to meet their duties on temporary accommodation.
In 2023/24, councils spent nearly £2.3 billion on temporary accommodation - around £1.06 billion of this cost needs to be met by councils using either their reserves or the grant.
Last year, councils received £399.8 million in grant funding to spend on domestic homelessness and temporary accommodation pressures - the extreme demand pressures facing councils mean that, in many areas, a large part of this must be spent on temporary accommodation.
However, under the new funding arrangements for 2024/25, while grant allocation has increased to £633 million, at least 49 per cent of this funding must now be spent on homelessness prevention and relief activities. This leaves only 51 per cent (£322.83 million) available for temporary accommodation.
This change means councils have up to £76 million less to spend on temporary accommodation compared to last year, forcing them to cover the gap from already-stretched reserves.
The LGA has previously highlighted that the temporary accommodation subsidy gap—the shortfall between the actual cost of providing accommodation and the funding available from the Department of Work and Pensions —amounted to £204.5 million in 2022/23.
The LGA is calling on the Government to urgently remove the ringfence within grant funding, as well as uprate the temporary accommodation subsidy to 90 per cent of the prevailing local housing allowance rate (housing benefit), to relieve pressure on councils’ reserves and enable them to focus on preventing homelessness.
Cllr Adam Hug, Housing spokesperson for the LGA, said:
“It is right that the Government has increased its focus on prevention and relief of homelessness, however this sudden shift in funding allocation without a suitable transition period risks exacerbating the financial pressure councils are under at a time when temporary accommodation costs continue to rise dramatically.
“An uprating of the temporary accommodation subsidy is desperately needed to address the significant and growing cost pressures faced by councils."
“As the Spending Review approaches, now is the opportunity for government to ensure councils are sufficiently resourced to provide essential services and help boost growth to communities.”
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