Temporary accommodation spending could create a deficit of over £740m per year in the capital, research has revealed.
According to a report from the London School of Economics (LSE), commissioned by cross-party group London Councils, the London Housing Directors’ Group and Society of London Treasurers, boroughs are dedicating the equivalent of one in every nine council tax pounds to temporary accommodation (TA).
The report revealed that the collective TA spend of eight London boroughs was £543m in 2024/25 and has created a £223m deficit, placing further strain on their budgets due to the housing benefit subsidy freeze which prevents councils from reclaiming costs from the Government.
LSE researchers estimated that ‘if this pattern holds across all boroughs, the citywide annual shortfall will exceed £740m’, or £202 per household in London.
Highlighting the impacts of ‘astronomical’ TA costs, London Councils has emphasised that local authorities are being required to make service cuts, with seven boroughs in the capital dependent on Exceptional Financial Support and many others facing risk of bankruptcy unless the system is reformed.
Stressing the need for ‘urgent’ and ‘immediate reforms’, London Councils has called for a raise in Housing Benefit support to align with Local Housing Allowance (LHA) rates and an increase in LHA rates to ‘reflect the true cost of private rents’.
The group has also urged the Government to support councils in building or buying homes by delivering capital funding, helping to meet demand and improve TA standards.
Cllr Grace Williams, London Councils’ Executive Member for Housing and Regeneration, said: ‘Boroughs are doing everything they can to support homeless families, but the system is buckling under the strain. The housing benefit system has failed to keep pace with reality – and councils are paying the price.
‘We urgently need government to step in with emergency funding and long-term reform to prevent more families falling into homelessness and more councils facing financial collapse.’
