Subsidy gap for temporary accommodation threatening financial viability of councils: LGA
Frozen Local Housing Allowance rates have left councils to meet £737.3m in temporary accommodation costs over the past five years that they are unable to claim back from government, the Local Government Association has warned.
The LGA said these costs are threatening councils’ financial viability and slowing down efforts to reduce homelessness.
The LGA noted that homeless households placed in temporary accommodation are able to claim housing benefit to go towards their housing costs. Councils pay the cost of that housing benefit upfront and are paid back by the Department for Work and Pensions (DWP).
“While households receive the full housing benefit they are entitled to, the amount councils can claim back is currently capped to 90 per cent of Local Housing Allowance (LHA) rates back in 2011," the LGA said.
“These rates have massively failed to keep pace with rising rental prices and the increased demand for temporary accommodation. This means that if the cost of the housing benefit claim is higher than those rates, the local authority has to pick up the cost.”
The Association has called on the Government to uprate temporary accommodation subsidy rates to 90% of current Local Housing Allowance rates.
It has also urged the Government to reconsider its decision to keep Local Housing Allowance rates frozen for other types of accommodation until at least April 2026 “to protect them from ongoing spiralling homelessness costs”.
According to the LGA, data from the DWP shows that the size of the subsidy gap in 2022/23 was double what it was in 2018/19 (£104.5 million in 2018/19 compared with £204.5 million in 2022/23).
Cllr Adam Hug, Housing spokesperson for the LGA, said: “We are in the midst of a housing crisis, with more people than ever seeking homelessness support from councils as there aren’t enough affordable homes available.
“The pressure this puts on councils’ budgets is putting councils under enormous strain. Without serious intervention, more councils will be at risk of having to seek emergency government support."
Cllr Hug added: “Council housing budgets are being stretched to the limit and they must not keep being left to bridge the gap between rent and the amount we are able to recover via housing benefit subsidy.
“We need urgent government action to address the temporary accommodation subsidy gap alongside the creation of a more effective housing and welfare system which reduces and ideally eliminates reliance on temporary accommodation in the long-term. This will not only improve outcomes for communities but also bring significant financial benefits to the public purse.”
A Government spokesperson said: "We have inherited a housing system which is broken, which is why we are committed to the biggest increase in affordable housing in a generation, and to ensuring our social security system is fair and sustainable.”
Harry Rodd
