Homelessness firm owned by London councils confirms it will close this year

Capital Letters is estimated to have saved taxpayers approximately £240m over six years, but it blamed the post-pandemic housing crisis and rental rises for its closure.

Set up in 2018 following the introduction of the Homeless Reduction Act to address systemic issues facing London boroughs in managing homelessness and the escalating costs of temporary accommodation, it was originally funded by the government.

Capital Letters began as a non-profit organisation that partnered private landlords with 21 member boroughs to lease homes for homeless families at Local Housing Allowance (LHA) rates. A council would find someone on its housing waiting list suitable for the property, who then became a private tenant of the landlord, discharging the local authority of its duty.

The firm struck a number of big deals over the years. In 2021, it announced plans to lease 4,000 mostly new-build homes from investors in a deal worth £1.5bn.

Sue Edmonds, chief executive of Capital Letters, said in a statement: “Capital Letters has saved taxpayers around £240m over the last six years, but the impact of the post-pandemic housing crisis, both in the unprecedented rise in rental prices and changes in the financial markets, has made accessing affordable capital to deliver more homes for London impossible.

“Our original success procuring great-quality, safe, secure and affordable homes for Londoners experiencing homelessness was stopped by rent inflation in the capital.

“We rely on landlords letting their properties at LHA rates – which are affordable for those receiving benefits – but escalating costs and opportunities to increase revenue have resulted in rents inflating beyond LHA, making them unaffordable, and landlords leaving the market completely.”

Ms Edmonds said properties with rents at LHA levels now made up around 1.6% of London rental stock, when LHA was designed to cover the lowest 30%.

She said the firm had pursued funding options and new business models, but had been badly affected by uncertainty in the international markets and the cost of borrowing.

She added: “With a very heavy heart, we have come to the conclusion that – in the absence of any alternative funding or income-generating options that would enable Capital Letters to continue to operate – it is better to proactively take a considered and prudent decision whilst we remain solvent to end this brilliant project with probity and our proud legacy intact.

“I’m immeasurably proud of what my team has achieved over the past six years and the positive impact Capital Letters has had driving new ways of working and approaches to solving homelessness across London.”

Lynne Hale, chair of the boroughs’ representative body, comprising all 10 members of Capital Letters, said: “It’s a hugely difficult time for London boroughs, sourcing homes for families experiencing homelessness, and the loss of Capital Letters will make it harder.”