Why council taxpayers are picking up the tab for a broken housing system

London’s homelessness crisis constitutes nothing less than an emergency. One in 50 Londoners are homeless and living in temporary accommodation, yet London boroughs have not been equipped with the resources to support our residents out of homelessness.

And while we desperately try to keep a roof over people’s heads, we’ve been forced to dip ever deeper into other council resources to pay for it – primarily drawing from residents’ council tax.

“London’s homelessness crisis constitutes nothing less than an emergency”

The amount we spend trying to fix this crisis is staggering. Around £2bn was spent on homelessness by London boroughs in 2024-25. And while we receive some support from the government to meet our costs, it is not enough.

Newly published research by the London School of Economics estimates that boroughs are left to plug a £740m funding gap because of inadequate government funding for temporary accommodation – equivalent to £202 a year for every household in the capital.

This represents 11% of the average Londoner’s council tax bill – money that could otherwise be spent on other much-needed public services such as our libraries, leisure centres, sports facilities and children’s centres. In the current system, increasing homelessness costs means less money for the other services our residents rely on. 

In 2024-25 the total cost of homelessness in London soared to £5.5m a day, up £4.2m from the previous year. This level of spending is unsustainable – particularly when the government’s proposed funding reforms could leave London boroughs collectively worse off by more than £700m.

For homeless families, this means being placed in temporary homes further and further away from their places of work and their children’s schools. We know that such circumstances can be hugely detrimental, affecting children’s education, health and future life chances.

Yet under the current system, there is no alternative. As the LSE research found, this is a result of the national government’s current funding arrangements, which mean higher quality and better value for money housing is financially unviable.

“The national funding arrangements mean we have no choice but to resort to the ‘least-worst’ options available and affordable to us”

The only people who benefit from the current situation are landlords. The reality is that the national government’s funding rules force councils to shell out millions on a daily basis for poor quality homes from landlords who have zero incentive to invest in raising the standard of their homes. 

The LSE report also found that managing the temporary accommodation crisis and the intense workload required to secure sufficient housing means boroughs’ homelessness teams have less time and money to work on preventing residents from losing their homes in the first place.

This in turn contributes to a cycle where more and more households become homeless, while those in temporary accommodation stay there for longer. 

In the Autumn Budget the government must end the near 15-year freeze on subsidy for temporary accommodation. It is imperative that we improve the housing we provide for tens of thousands homeless families in London – including 90,000 children – and get on the front foot in terms of prevention. It will also increase investment in wider local authority services that all residents rely on and prevent many councils from financial catastrophe. 

The temporary accommodation funding system is perhaps one of the few things that hasn’t radically changed in the political landscape for more than 14 years, so the time to address it is now. 

Grace Williams, executive member for housing and regeneration, London Councils