England: Temporary accommodation costs ‘set to balloon to almost £4bn by 2029/30’

The analysis was carried out by the Local Government Association (LGA) and looked at the cumulative cost of the ‘Temporary Accommodation Subsidy Funding Gap’ in the past eight years. 

It found that since 2017/18, councils across England have spent almost £1.5bn more on temporary accommodation than they have been reimbursed through subsidies. This is alongside cost and demand pressures continuing to outstrip the overall funding available to councils, which has compounded over many years and had a damaging impact on council services

Yet without intervention, this figure could balloon to nearly £4bn (£3.9bn), within the next four years (2029/30), an increase of more than double. 

While households receive the full housing benefit they are entitled to, the amount councils can claim back from DWP is currently capped to 90% of Local Housing Allowance (LHA) rates from back in 2011.

This means councils are not able to claim back costs that reflect what they are spending, and it is increasingly getting worse as the demand for temporary accommodation (TA) rises and they can claim back less.

The LGA is calling on the UK Government to address this issue urgently by uprating the LHA rate councils can be reimbursed to 90% of the prevailing LHA rates. 

In addition to identifying how much this difference had left local taxpayers to pick up over recent years, it also found that the annual gap was set to grow by 65% in the next five years, from nearly £360 million to £595m per year, without decisive action. 

In 2024/25, the most recent year for which we have data, the total spend on housing benefit for councils in England on temporary accommodation was £1.27bn, while the DWP only reimbursed £911m to councils, leaving an almost £360m gap.

If the LGA ask of uprating the subsidy rate to 90% of prevailing LHA rates were agreed, the total projected cumulative cost by 2029/30 will be 37% less than if nothing is changed - that is a saving of £1.5bn to councils, money that could significantly boost homelessness prevention and council housebuilding. 

The scale of the problem is immense, with currently 132,000 households in TA including 172,000 children.

Cllr Tom Hunt, chair of the LGA’s Inclusive Growth Committee, said: “The temporary accommodation subsidy gap is a problem that is getting worse each year but is fixable. This would have a huge boost to council finances, money which could go towards preventing homelessness and building the homes that our communities desperately need. 

“Yet because of this ever-widening issue councils are caught in a vicious cycle of ever-increasing temporary accommodation costs versus static rates they receive back to cover their costs.

“We urge the government to uprate housing benefits to 90% of the current LHA rate – this outlay could yield significant results for the economy and national wellbeing.”