PAC: Homelessness crisis places unsustainable pressure on local authorities' crumbling finances

Record homelessness levels are placing local authorities' finances under unsustainable pressure. In a report published today, the Public Accounts Committee (PAC) warns of an overreliance on the use of temporary accommodation, due in part to a dwindling and increasingly costly housing stock.  

The PAC is calling for a clear strategy and stronger support for local authorities to address what has become a crisis situation. Of the estimated £2.1bn spent by local authorities in 2023-24 on temporary accommodation, the report finds that a large proportion was used to meet the urgent need for immediate support, rather than the preventative measures so desperately needed. Despite there being an overarching homelessness strategy for each of the devolved nations, England does not have one.  

The report calls on Government to set out such a strategy, which should clearly outline how preventative measures will be incentivised. It also argues for an exemption from requirements on local connections or residency for all veterans, care leavers under 25 years, and victims of domestic abuse, as well as for competition between local authorities and the Home Office for temporary accommodation to be eliminated. 

The report raises deep concerns around the number of families being housed outside their local area. This has risen to 39,000, a practice which alarmingly seems to be becoming increasingly common. Equally alarming is the fact that 6,000 homeless families with children live in B&Bs, due to the lack of alternative accommodation. The report stresses the detrimental impact that living in this type of accommodation has on people's lives; particularly children whose safety and wellbeing can be severely compromised as a result. Government should encourage better coordination between local authorities and set out how it will support them to reduce the use of B&Bs. 

With 45% of households facing a shortfall between the Local Housing Allowance (LHA) they receive and the rent they pay, the PAC warns the Government is not considering the impact on homelessness when setting LHA rates. The decisions made by Government to determine LHA are seemingly subjective. This issue is exacerbated by the lack of affordable housing, on which Government seems frustratingly unable to provide detailed assurances. Further, poor oversight of the sector and gaps in current regulations are allowing is allowing landlords to provide costly, sub-standard housing with little support, supervision or care.  The PAC urges Government to set out the logic behind LHA rates and details of the proposed new housing strategy along with strengthening its position to provide better oversight of the sector.   

Sir Geoffrey Clifton-Brown MP, Chair of the Committee, said: “My Committee is deeply concerned by the number of people currently being housed in sub-standard, overpriced and at times, wholly inappropriate accommodation, sometimes a long way from their previous home. A lack of affordable housing, a focus on short-term solutions and no clear strategy to tackle this issue have left us with thousands of families in deeply troubling circumstances. Worryingly there seems to be no desire to move away from an unsatisfactory short-term system, leaving local authorities attempting to save a sinking ship with a little more than a leaky bucket.   

“Local authorities find themselves at breaking point as they haemorrhage funds to cover the rising costs of housing families in temporary accommodation. We are calling for an overarching strategy that addresses the need for better connectivity across Government departments to tackle the root causes of this crisis. Without one, we fear this will remain an issue into which money is simply poured, without effectively tackling the blight of homelessness. Government must learn from the lessons of the past to inform what they will do in the future." 

ENDS 

PAC Report Conclusions and recommendations 

1. Local authorities are insufficiently resourced to focus on preventing households from becoming homeless. In 2022-23, local authorities spent over £2.4 billion on delivering homelessness services, of which over £1.6 billion was used to provide temporary accommodation. Data published after our evidence session suggest that spending rose in 2023-24, and totalled around £3.1 billion and £2.1 billion respectively. Local authorities are permitted to spend Homelessness Prevention Grant funding, which was worth around £440 million in 2024-25, to discharge any of their duties under homelessness legislation. In practice, the high numbers of people already in the homelessness system mean that local authorities use a significant portion of it to fund the provision of temporary accommodation, particularly in areas of poor affordability, rather than spending it on prevention work. Temporary accommodation costs are forcing some local authorities to approach MHCLG for exceptional financial support. MHCLG says it is actively looking at ways to incentivise and support local authorities to deploy more funding into preventive rather than reactive activities. The options for doing this may include: reducing the numbers of people presenting as homeless in the first place; reducing the cost of the temporary accommodation that local authorities are procuring; and providing multi-year funding settlements, which would enable local authorities to plan their homelessness work more strategically. 

Recommendation 1. Alongside its Treasury Minute response, MHCLG should write to the Committee with a detailed explanation of how it plans to incentivise and work with local authorities to improve their homelessness prevention activities. 

2. It is unacceptable that B&B accommodation is being used routinely to house people rather than as a last resort. We are alarmed at the detrimental impact that living in B&B accommodation has on people's lives – not least on children, whose safety and wellbeing can be profoundly compromised by such living arrangements. Homelessness legislation makes it clear that B&Bs should be used only as a last resort and MHCLG recognises that it is "seriously sub-optimal". Any local authority with more than five families in B&Bs beyond the six-week limit is required to work with MHCLG's Homelessness Advice and Support Team (HAST) to implement a plan for eliminating its use of B&Bs. These plans focus on approaches such as better prevention of families going into B&Bs, improving management of the temporary accommodation B&B stock, and finding alternative procurement of temporary accommodation. Yet as at June 2024, due to the scarcity of alternative accommodation, almost 6,000 homeless families with children were being housed in B&Bs, and almost 4,000 of these families had been there for longer than the statutory maximum period of six weeks. 

Recommendation 2. In its Treasury Minute response, MHCLG should set out how it intends to strengthen its use of HAST advisers in supporting local authorities to reduce their use of B&B accommodation. Alongside this MHCLG should support local authorities with high rates of temporary accommodation use to plan how to reduce their reliance on it. 

3. Too many people's lives are disrupted by being placed in temporary accommodation outside of their local area. For a variety of reasons, including lack of housing supply and suitability of accommodation, some local authorities struggle to place households in temporary accommodation within their local area. Over the period 2018-19 to 2023-24, the number of households placed out of area increased by 42%. As at June 2024, around 39,000 households were placed out of area. MHCLG is aware of families sometimes being placed a considerable distance away, and acknowledges that this can cause difficulties, especially for children, including challenges for their education, and social isolation affecting their support and health needs. The homelessness legislation and code of guidance state that local authorities should, as far as possible, avoid placing households out of area. MHCLG does not have the data to say exactly how far away people are living from their local authority areas. Anecdotally, it understands there are cases where local authorities are essentially "swapping" households. MHCLG is working to generate better data, and particularly to make information available to local government about where households have been placed, and who has been placed in their area. It is also considering sharing good practice and facilitating conversations between local authorities who typically place households out of area. 

Recommendation 3. MHCLG should improve its data on out of area placements as a matter of urgency, and use the data to encourage better coordination between local authorities, to minimise the number of households placed out of area. It should also explore possible steps to incentivise councils to use local providers. 

4. We are not convinced that, in setting Local Housing Allowance (LHA) rates, the Department for Work & Pensions (DWP) has given due consideration to the impact on homelessness. Reforms to welfare benefits since 2011, including periodically capping and freezing LHA rates, have reduced the income households can derive from benefits in real terms. Some 45% of households now face a shortfall between the LHA they receive and the rent they pay. DWP states that it makes decisions about LHA rates in the context of other benefits and has decided to freeze LHA rates for 2025-26 at the 2024-25 level. We are concerned at the subjectivity of DWP's judgements and that it cannot say what impact raising LHA rates would have on homelessness. Separately, local authorities pay for temporary accommodation and reclaim the costs from DWP. Given that funding is essentially based on the 2011 LHA rate, it has not kept up with local authorities' rising temporary accommodation costs. In 2022-23, local authorities in England experienced a subsidy loss of £204.5 million, compared with £41.4 million in 2012-13 (both expressed in 2022-23 prices). DWP explains that the subsidy has never covered local authorities' full costs, and MHCLG argues that it makes up some of the subsidy loss through its local government funding settlement, but it is unclear how an appropriate amount is decided upon. 

Recommendation 4. Alongside the Treasury Minute response, DWP should write to the Committee setting out, in detail, its justification for the levels of LHA it has set, both for individuals and for local authorities with regard to the temporary accommodation subsidy. 

5. Tackling homelessness has long been hampered by the absence of a joined up, cross-government approach. Each of the UK devolved administrations has an overarching homelessness strategy or action plan. By contrast, there is no strategy or target for homelessness in England, despite this Committee having recommended in 2017 that a cross-government strategy be published. The Government agreed with this recommendation and said it would be implemented by July 2018. In the continued absence of such a strategy, the work of government departments can lack coordination. For example, there are multiple funding streams that can be used to tackle homelessness, which can be challenging for local authorities to administer. And we are dismayed to hear that local authorities looking to acquire temporary accommodation for homeless households still sometimes find that the Home Office has outbid them to accommodate asylum seekers in the area. The Home Office says it will now withdraw its interest if it hears that a local authority is seeking to acquire the same accommodation. The Government has now created an inter-ministerial group on homelessness, whose officials group is chaired by MHCLG. While it expects to produce a strategy in 2025, we are unclear how this arrangement will achieve results that the existing cross-government boards with a remit relevant to homelessness have failed to achieve. 

Recommendation 5. In its Treasury Minute response, MHCLG should provide the Committee with further details of how its proposed cross-government homelessness strategy will generate practical improvements, including through: 

A.      a consolidation of the funding to tackle homelessness into far fewer streams; 

B.      eliminating competition between local authorities and the Home Office for temporary accommodation; and 

C.      learning appropriate lessons from the UK devolved administrations. 

D.     implementing the exemption from the local connection or residency test for all veterans, care leavers under 25 years, and victims of domestic abuse, while mitigating the impact for other groups. 

6. The homelessness problem is being exacerbated by a severe shortage in housing supply, and especially affordable housing. Homes England, which is sponsored by MHCLG, fell below its central targets in 2022-23 in terms of new home starts, completions, unlocked housing capacity and households supported into home ownership. MHCLG accepts that a significant ramping-up in affordable housing supply, beyond individual strategic sites, would be needed to make a substantial impact on homelessness levels, requiring new supply in areas where homelessness pressures are particularly acute. However, it is troubling that there are so many barriers to increasing housing supply, such as problems with the viability of sites. MHCLG has committed to producing a long-term housing strategy early in 2025. It states that the strategy is likely to propose a range of actions across the supply chain, on themes including: construction sector skills, an area about which we are particularly concerned; working with developers; building up the role of SMEs in developing property; and enhancing the capacity of local planning authorities to handle cases. But frustratingly, MHCLG is unable to provide more detail about the likely content, and especially about the number of social housing units that would need to be built during the period of the strategy. 

Recommendation 6. In its Treasury Minute response, MHCLG should provide the Committee with an update on how its proposed new housing strategy will achieve practical improvements in the delivery of new homes, and particularly affordable homes. In addition, both MHCLG and Homes England should detail why Homes England fell short of its targets for new homes in 2023-24, including affordable homes, and what steps they are taking to ensure targets for 2024-25 and beyond will be achieved. 

7. Despite legislation designed to tackle well-established problems and gaps in regulation, MHCLG has made no progress in improving the oversight of the supported housing sector. Supported housing can provide much-needed homes for people transitioning from homelessness, or may stop people from becoming homeless in the first place. But this Committee has previously expressed concerns that gaps in regulation mean landlords can provide costly, sub-standard housing with little support, supervision or care. The Supported Housing (Regulatory Oversight) Act came into force in August 2023. It brought forward national standards for support, and looked to give local authorities power to tackle poor quality supported housing in their area, yet by the end of 2024 the Act had not been implemented. MHCLG has applications open for membership of a supported housing advisory panel. It will be at least early 2025 before it issues a consultation on a proposed local authority licensing scheme for supported housing landlords. The consultation is likely to last for several months, after which MHCLG will need to evaluate the responses and lay the appropriate regulations, before finally implementing the scheme. We are not persuaded by MHCLG's argument that it still cannot commit to any form of timetable for implementing the provisions of the Act. 

Recommendation 7. MHCLG should implement the provisions of the Supported Housing (Regulatory Oversight) Act as quickly as possible, and provide an update on its progress in its Treasury Minute response. 

Notes to editors: 

The Public Accounts Committee published its Housing: State of the Nation report in 2017, which warned that unless adequate measures were taken to address England's “broken” housing market, we would see a growing number of people living in temporary accommodation.  

Following the Committee's agreement of its report, the Government announced that it would be tripling the Rough Sleeping Winter Pressures Funding from £10 million to £30 million. This funding has been allocated for councils to provide safe and secure accommodation for those sleeping rough long-term.