Local government financing is in a state of crisis. Six local authorities have declared bankruptcy since 2021 and more are expected to follow in the coming years. One of the biggest drivers of the crisis is the spiralling cost of providing temporary accommodation to homeless households.
Temporary accommodation is designed to be just that; emergency housing provided by local authorities for short periods before residents are able to move out of homelessness and into permanent housing. The reality in 2024 is very different, however. Quarterly homelessness statistics for England revealed that 112,660 homeless households were living in temporary accommodation on 31 December 2023, a 12% increase from the year before.
The majority of these households aren’t there for weeks or months, they’re stuck in it for years, with little hope of moving out of homelessness. In many parts of the country, local authorities’ own accommodation is exhausted and they have been forced to turn to hotels and B&Bs to fulfil their statutory obligations.
Not only is this unsuitable and often unsafe for families, it is also far more expensive. Councils have no choice but to pay extortionate nightly rates for an increasing number of homeless residents. In the South East, this costs between £50-£90 per person per night, adding up to £18,250-£32,850 per person per annum. The system is overwhelmed and the majority of these households face the reality of there being no real pathway out of homelessness for years to come.
The new Labour government’s proposed solution to the housing and homelessness crisis centres around housebuilding. The party’s election manifesto pledged to build 1.5 million new homes within the next five years, though it provided no indication of what proportion of these would be social homes. There is no doubt that housebuilding is a necessary and central part of the solution, however failing to combine this with other measures won’t meaningfully tackle the homelessness crisis and its crippling effect on local authority finances.
Starmer’s intention to ban section 21 notices will prevent some from becoming homeless. Irrespective of the inevitable loopholes that will be exploited by landlords, however, this alone will not stem the tide of families and young people falling into homelessness. Current Labour policy fails to address a central driver of the homelessness crisis; millions of households up and down the UK simply don’t have enough money to live.
Over a third of working-age adults in Britain have less than £1,000 in savings. More and more households are being evicted and becoming homeless due to an inability to withstand relatively small financial shocks. Without a plan to address this root cause of homelessness, the crisis will only continue to worsen on the new government’s watch.
A lack of financial resilience is also a key reason why over 100,000 households are unable to move out of temporary accommodation. For many households, privately rented housing is available, but they are unable to access as they can’t afford a rent deposit. Others are offered social housing, but risk falling back into homelessness as they have to borrow money to furnish it. The new government needs to recognise that without policy interventions to improve the financial resilience of households experiencing homelessness, housebuilding alone will only have a limited impact on the homelessness crisis.
For a number of years, a simple policy intervention that gives households financial resilience at the right time has been pioneered in the charity sector – personalised budgets. These flexible budgets of around £1,000 give those who are homeless or at immediate risk of homelessness the money they need to move or stay out of homelessness for good. They are tailored to each individual and can be used to unlock a range of financial challenges, from clearing rent arrears to prevent evictions to paying for rent deposits to funding training courses that unlock employment opportunities.
Greater Change has been delivering these budgets in partnership with other charities for the past five years and has developed clear evidence that they are highly effective in supporting households out of homelessness and saving local authorities millions of pounds in temporary accommodation costs as a result. The average cost of supporting each person was just £1,319 last year and 86% of those the charity supported maintained their move out of homelessness 6-12 months on.
With local authorities spending tens of thousands of pounds per person on temporary accommodation each year; the financial incentive for the government to integrate personalised budgets into an evidence-driven government strategy to ending homelessness is clear. The simple policy measure could be implemented by making it a statutory requirement for local authorities to provide personalised budgets and combining this with a corresponding budget allocated centrally to fund the programme. Only by combining housebuilding with measures such as personalised budgets does Starmer’s government have any hope of ending the homelessness crisis.
Click here to subscribe to our daily briefing – the best pieces from CapX and across the web.
CapX depends on the generosity of its readers. If you value what we do, please consider making a donation.
