With one in 50 London residents now living in temporary accommodation at a cost to the city’s local authorities of some £3 million a day, the capital’s housing crisis is threatening to “break borough budgets”, the cross-party London Councils group warned today.
New figures from the group, which represents all London boroughs, show a 10 per cent increase in the number of homeless London households living in temporary accommodation arranged by their local authority over the past year. The total is now 60,959 households – more than 175,000 individual Londoners, including one in 23 London children.
Rising demand coupled with a shortage of cheaper accommodation has also been forcing the boroughs to use more expensive options, such as commercial hotels, to meet their statutory homelessness obligations, the group said. That has led to costs soaring by almost 40 per cent in 12 months – with knock-on effects across council budgets as a whole.
“The housing crisis is having a devastating impact on Londoners’ lives and wreaking havoc on town hall finances across the capital,” said London Councils chair Claire Holland, who also leads Lambeth Council. “The unavoidable reality is that spiralling costs and years of underfunding threaten to break boroughs’ budgets.”
With the boroughs collectively now forecasting an overall funding gap of more than £600 million this year, rising to £700 million in 2025/26, they are calling on Chancellor Rachel Reeves for an immediate injection of extra cash in her first budget, due on 30 October.
Three boroughs, Croydon, Lambeth and Hillingdon, are already reliant on emergency financial support from Whitehall (though in Lambeth’s case it is to meet the costs of compensating survivors of historical child abuse in council children’s homes rather than due to any wider financial problems), and several others are “edging closer towards effective bankruptcy”, the group says. With council resources down by a fifth since 2010/11 but demand for services increasing, they argue in a submission to the Treasury that an urgent seven per cent revenue spending hike is needed to bridge the gap.
Further asks include removing the government cap on Local Housing Allowance levels, which have significantly restricted housing benefit in the capital, and extending Whitehall funding to help rough sleepers for a further year, and avert a “cliff-edge” in service provision for street homelessness.
There was a separate warning too that the boroughs’ housing revenue accounts – ring-fenced budgets using rental income to pay for managing and maintaining existing council homes as well as funding new ones for social rent – were also under pressure because of increasing costs and less income.
A cocktail of rising inflation, repair and building costs and extra fire safety and other regulatory requirements, coupled with government restrictions on social rent levels, was leading to boroughs planning some £170 million cuts to housing budgets over the next four years, focusing “only on the most urgent repairs and delaying much-needed improvements,” the group said.
A new capital funding deal with government, including more cash for much-needed affordable homes and a long-term agreement on rent levels was therefore urgently needed too, the councils added, echoing the recommendations of a wider cross-party council coalition spearheaded by Southwark Council, published last week, which warned of a £2.2 billion “black hole” in councils’ housing budgets by 2028.
That report added to Reeves’s in-tray a call for £644 million “emergency” cash to stabilise councils’ housing revenue accounts in the short term, followed by reforms including restricting Right to Buy sales of council homes and a separate cash boost to allow councils to take over private developments stalled because of market downturns.
More affordable homes were desperately needed, it said. But without a quick fix to funding, it warned, the reality was that, rather than increasing supply, “some councils will have no option but to sell more of their existing stock, on top of Right to Buy sales, to finance investment in an ever-shrinking portfolio of council homes”.
Earlier this year, Sadiq Khan announced his own £100 million fund for councils to convert market-rate homes on development sites that have started but become stalled due to economic conditions into affordable homes, while also calling for an overall £2 billion boost in government housing funding.
Further research published this week by the public sector union UNISON also suggested that councils in the capital were “teetering on the brink of financial disaster”. It highlighted individual borough forecasts, including Croydon facing the biggest shortfall of £53 million, followed by Barnet at £47.8 million, Camden at £37.5 million and Newham at £33 million.
OnLondon.co.uk provides unique coverage of the capital’s politics, development and culture. Support it for just £5 a month or £50 a year and get things for your money too. Details HERE. Follow Charles Wright on X/Twitter. Photo: Brixton Town Hall, Lambeth. This piece was updated at 17:26 to give additional detail about Lambeth’s need for government help in the form of a “capitalisation direction“.