Councils face ‘unsustainable financial pressure’ on homelessness, says watchdog

Councils are facing “unsustainable financial pressure” in dealing with record levels of homelessness, the public spending watchdog has said as it called for a long-term and cross-Government strategy to tackle the problem.

England remains an outlier in the UK as the only one of the four nations without a strategy or target for statutory homelessness, which the National Audit Office (NAO) noted is the case despite its recommendation for one seven years ago.

The NAO report, published on Tuesday, is its first since 2017 on the issue, which covers people considered homeless as they are in temporary accommodation provided by their local authority, rather than those rough sleeping.

The report acknowledged the rough sleeping strategy under the previous Conservative government, but said no such strategy had been formulated to tackle statutory homelessness – something each of the other UK devolved administrations has an overarching strategy or action plan for.

Funding for local authorities to meet their obligations under the 2017 Homelessness Reduction Act, extending local authorities’ statutory duties to include prevention and relief, is a major issue amid rising need, the NAO said.

The report stated: “Funding remains fragmented and generally short-term, inhibiting homelessness prevention work and limiting investment in good-quality temporary accommodation or other forms of housing.

“Until these factors are addressed across government, DLUHC (Department for Levelling Up, Housing and Communities) will not be able to demonstrate that it is delivering optimal value for money from its efforts to tackle homelessness.”

The NAO said homelessness numbers “are at a record level and expected to increase”.

The latest figures, to December 31 last year, showed a new record high of 145,800 children in temporary accommodation, up by a fifth on 20 years ago when records for this measure began.

Dealing with homelessness is creating unsustainable financial pressure for some local authorities

There were a total of 112,660 households in temporary accommodation in England, of which 71,280 were households with children, by the end of last year.

The issue has also hit the headlines as the future king is spearheading a project to end homelessness.

The Prince of Wales , marking the first year of his Homewards initiative earlier this month, recognised that “homelessness touches so many more than the men and women we sadly see on our streets” as he voiced an ambition to “improve understanding about the different forms of homelessness, shifting perceptions and boosting optimism that it can be ended”.

The NAO said the department – now the Ministry of Housing, Communities and Local Government (MHCLG) rather than DLUHC since the election – must provide local authorities with greater predictability of funding for homelessness and consider how it can support local authorities to focus more on homelessness prevention.

The watchdog called on the Treasury to review and simplify cross-departmental funding for homelessness as part of the next spending review and look at ways to “incentivise” departments to support homelessnessprevention.

Providing temporary accommodation cost local authorities over £1.6 billion in 2022-23, including for families with children to be housed in bed and breakfasts which the NAO said “is unsuitable”.

The report added: “Dealing with homelessness is creating unsustainable financial pressure for some local authorities.”

Homelessness and the lack of affordable housing 'is one of the most urgent issues facing councils' and that 'without concerted effort, the situation will only get worse'

The NAO said there was a £204.5 million gap in the funding local authorities received to cover the cost of providing temporary accommodation and the actual costs needed in 2022-23, up by more than £150 million in a decade.

This financial pressure “can be particularly challenging” for smaller local authorities, the watchdog said, noting the District Councils’ Network had warned that its members were spending up to half of their total net budget on temporary accommodation, while some feared they could end up needing to issue Section 114 – otherwise known as bankruptcy – notices.

The lack of housing for social rent was also recognised as limiting the options for people who end up in temporary accommodation to escape homelessness.

Tension between departments with sometimes competing interests can affect homelessness services, the report noted, giving the example of how a local authority explained that it had been outbid on a building for temporary accommodation by the Home Office, which needed a property to house asylum seekers.

Another example saw a council having to “significantly limit the number of new social housing units built because of government rules on water demand”.

Claire Holland, housing spokesperson for the Local Government Association, said homelessness and the lack of affordable housing “is one of the most urgent issues facing councils” and that “without concerted effort, the situation will only get worse”.

The LGA welcomed the NAO recommendations, and called for the Section 21 “no-fault” evictions ban to be brought in and “empower councils” to build more affordable homes

A spokesperson for MHLGC said: “Homelessness levels have sky-rocketed and too many families are living in temporary accommodation.

“We will take the action needed to tackle this issue and develop a long-term, cross-government strategy working with mayors and councils to put Britain back on track to ending homelessness.

“We welcome the NAO’s report which shines a light on this important issue and will consider their recommendations as we develop our strategy.”