London councils’ temporary accommodation ‘bankruptcy risk’ as landlords quit

New data from London Councils paints a grim picture of the capital’s homelessness crisis, revealing a shocking 40% increase in monthly spending on temporary accommodation for homeless households last year.

This translates to a staggering £90 million per month.

The report warns of a ‘critical danger’ to borough finances due to skyrocketing homelessness rates and a severe lack of affordable housing.

The situation is being made worse by private landlords quitting the temporary accommodation market, opting for higher returns from private tenants or selling their properties altogether.

The latest figures show a 56.5% rise in ‘notices to quit’ received by boroughs from landlords.

‘Homelessness has a devastating impact’

Cllr Darren Rodwell, London Councils’ executive member for regeneration, housing and planning, said: “Homelessness has a devastating impact on individuals and families, while also bringing massive and unsustainable costs to boroughs’ budgets.

“Boroughs work hard to house homeless Londoners. However, London’s ballooning temporary accommodation bill is a critical danger to boroughs’ financial stability.”

He added: “If things go on the way they are, it’s no exaggeration to say these enormous costs pose a bankruptcy risk.

“We’re urging ministers to boost funding support for boroughs grappling with a worsening homelessness crisis.

“Ending the unfair cap on housing benefit subsidy rates for temporary accommodation would relieve much of the pressure on boroughs’ resources, helping us balance the books while providing homelessness support to everyone who needs it.”

Urging the government for increased support to help

Ahead of the upcoming budget, London Councils are urging the government for increased support to help boroughs manage these rising costs and avoid the need for a Section 114 notice, essentially declaring bankruptcy.

A key demand is lifting the ‘unfair’ cap on government funding that subsidises temporary accommodation costs, currently based on outdated 2011 benefit rates and failing to reflect current market realities.

The report further highlights the worsening situation:

• The number of Londoners seeking homelessness support from their local boroughs rose by 14.5%
• There as a 7% increase in the number of households placed in temporary accommodation
• The number currently homeless and living in temporary accommodation is more than 175,000 Londoners – that’s 1 in 50 residents and includes an estimated 85,000 children.

The data shows that London accounts for more than half (57%) of England’s homeless households in temporary accommodation.

Homelessness crisis has been escalating for years

London’s homelessness crisis has been escalating for years, with the number of households in temporary accommodation almost doubling since 2010.

The Covid-19 pandemic, coupled with the rising cost of living and a turbulent private rented sector, has further exacerbated the issue.

With the current spending trajectory, London is on track to spend more than £1 billion every year on temporary accommodation.

While some government funding is available, it falls short, leaving boroughs facing a projected budget overspend of at least £150 million this year.