LGA warns temporary accommodation spending set to double to nearly £4bn

The LGA are calling on the government “to address the issue urgently” by updating the amount that councils can claim back to 90% of the prevailing LHA rates.

In 2024-25, English councils spent £1.27bn on temporary accommodation, but were only reimbursed by the government for £911m, resulting in a shortfall of £360m.

This heightens cost and demand pressures, which continue to outstrip council funding, compounding over the years and leaving many in financial straits with rocketing debt.

If the government acquiesces to LGA’s demand, the association projects that the cost to councils will reduce by 37%, saving them £1.5bn, which would free up funds for homelessness prevention, council housebuilding and other longer-term solutions.

The report comes as 132,000 households are currently in temporary accommodation, including 172,000 children. 

Tom Hunt, chair of the LGA’s Inclusive Growth Committee, said: “The temporary accommodation subsidy gap is a problem that is getting worse each year but is fixable.

“This would have a huge boost to council finances, money which could go towards preventing homelessness and building the homes that our communities desperately need. 

“Yet because of this ever-widening issue, councils are caught in a vicious cycle of ever-increasing temporary accommodation costs versus static rates they receive back to cover their costs.”

The government has pledged to reduce the use of temporary accommodation to house people, with homelessness minister Alison McGovern saying she wanted to end the use of B&Bs by the end of this parliament.

Despite calls from across the sector for a subsidy boost, the government has frozen LHA rates until 2026.

A government spokesperson said: “We’re tackling the impact of rising rents and the housing shortage with our commitment to build 1.5 million homes – including the biggest boost to social and affordable housing in a generation.

“We are also investing more than £1bn in homelessness services, launching a cross-government homelessness strategy and investing a record £39bn in affordable and social housing.”