Three councils are spending equivalent to at least half of their council tax revenue on homelessness support, forcing them to divert funding earmarked for other services.
The scale of the escalating housing crisis’s impact on valued community services is revealed in analysis by the District Councils’ Network (DCN), which is calling for urgent financial support for the most impacted councils.
DCN’s research suggests that 16 district councils spent equivalent to over 25% of their council tax income on temporary accommodation (TA) last year amid growing pressure.
The three councils spending the equivalent of 50% or more of their council tax receipts on supporting homeless households are:
- Crawley Borough Council 67%
- Hastings Borough Council 58%
- Dartford Borough Council 50%.
Nationally, the number of households in TA increased by 12.3% over the past year, to 117,450 households, including 74,530 households with children.
DCN’s analysis shows the 164 district councils, collectively serving 19.7 million people, overall spent the equivalent of 8% of their council tax yield on temporary accommodation.
A recent survey of district councils showed that they expect TA spending to increase by a third on average in 2024/25. This is an unsustainable financial burden on councils, with homelessness no longer a problem confined to metropolitan areas.
Crucially, the crisis has been significantly worsened by Government policy. Since 2011, it has capped the amount it pays councils for housing people in temporary accommodation. The funding councils receive is based on 2011 rental costs, leaving councils to cover an ever-widening shortfall, necessitating cuts to other services.
In DCN’s survey, 49% respondents said they expect to make cuts to cultural services next year without a fair funding settlement. 41% will cut community support services and 35% will make cuts to their leisure services.
We are calling on the Government to review temporary accommodation funding, including lifting the 2011 cap to reflect rents in 2024 – rents have increased sharply across the last 13 years. This is imperative to protect local services and make sure that councils can focus on finding families permanent homes.
Cllr Hannah Dalton, DCN Housing spokesperson, said:
“For too long the Government has increasingly shunted the costs of homelessness onto councils and their residents, straining our budgets to breaking point.
“Residents will be shocked to learn that the equivalent of as much as half of their council tax is being spent on temporary accommodation rather than the local services they expect their council to deliver for them. This housing crisis is impacting on every taxpayer and the entire community.
“When such a large sum is diverted to temporary housing, it leaves little for community initiatives, leisure services, green spaces and essential amenities. The Government must act now to address this unsustainable situation, providing immediate financial support for councils facing the worst problems and empowering councils to prevent homelessness in the first place.
“Without swift action, we risk a domino effect where councils have no option but to cut services which prevent homelessness, leading to a worsening homelessness problem and a vicious cycle that will swallow up even more of local taxpayers’ money.
“Councils would far rather be investing in preventing homelessness and in providing houses for everyone in our community who needs one, than spending vast sums on temporary accommodation. By giving us long-term sustainable funding and the powers we need we can make this much-needed shift, which will offer council tax payers better value in future.”
The DCN is calling for:
- An immediate review of temporary accommodation funding, including lifting the 2011 cap to cover actual costs.
- Investment in affordable housing initiatives.
- Enhanced powers and funding for local authorities to tackle homelessness’s causes.
- A cross-government strategy to address contributing socio-economic factors.
Cllr Michael Jones, Leader of Crawley Borough Council, said:
“The cost of temporary accommodation is now the greatest threat to district and borough councils’ budgets.
“Last year it cost our council £5.5m, compared to £262,000 in 2018/19. This is £2 for every £3 we get in council tax, which is spent on temporary accommodation – put frankly, most of it. If this continues, we will have no choice but to cut other services to continue to fund this.
“This is why we declared a housing emergency in February 2024 calling on the previous Government to act. The Government for a long time put us in a situation where we were massively subsidising costs they should have been paying and drastically running down our savings to do so.
“We need the new Government to take immediate action in relation to resetting the rate at which Housing Benefit Subsidy is paid, to stop many councils from going broke through no fault of their own.”
Cllr Stephen Holt, Leader of Eastbourne Borough Council, which spends the equivalent of 49% of its council tax on homelessness, said:
“Councils up and down the UK are dealing with a social and financial crisis that not only threatens the public services we deliver, but the future of local authorities as we know them.
“We launched a campaign over a year ago to highlight these issues, warning that numerous councils face effective bankruptcy unless proper intervention is provided, not just the high interest lending offered by the previous government.
“We need action including an end to no-fault evictions and an end to the 2011 freeze on the Local Housing Allowance.
“As a direct consequence of spending nearly £5m a year on temporary accommodation in Eastbourne – which equates to 49p in every pound of council tax we collect – we are currently consulting on in-year cuts and operational changes totalling £2.7m, despite already profiling £3m of savings in the 2024/25 budget.
“The situation is totally unsustainable.”