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London’s ‘temporary accommodation’ market drives up the costs of homelessness

Posted on 11 February 2016

A perfect storm of high rents and benefit restrictions means that the cost of homelessness is spiralling in London, according to independent research by the University of York.

London skyline (credit: Armando G Alonso, Flickr)

Researchers in the University’s Centre for Housing Policy found a dramatic rise in the number of households in the capital asked to leave their privately rented homes. With London boroughs looking to place these households in temporary accommodation (TA), the market has responded by driving up rents.

The study found that London boroughs were struggling to control rents. In the past, it was possible for boroughs to make long-term leasing arrangements with landlords. Now, more lucrative ‘nightly rates’ dominate the market, with boroughs negotiating on a case by case basis. One local authority officer characterised the situation as ‘a war of nerves’.

London now has over 50,000 households living in temporary accommodation and the pressure is stretching local authorities’ resources. Despite increases in rental costs, the Government has frozen the subsidy it offers through special housing benefit since 2011. Local authorities are meeting the shortfall -- estimated at £170m in 2014. At the end of last year, the Government announced that additional TA funding may be made available, through grants of up to £200,000 per local authority.

The actual costs of temporary accommodation are hidden in complex accounting arrangements, and the York research has aimed to clarify the situation through the creation of an accounting ‘spreadsheet’ that takes all the cost factors into account.

Dr Julie Rugg, of the Centre for Housing Policy, said: “London authorities are dealing with a sophisticated market, which knows how to play boroughs off each other to get the best deal. Few landlords in London want to deal with tenants on housing benefit, so those that do can – paradoxically – charge local authorities a premium. The TA market is entirely skewed.”

Sir Steve Bullock, London Councils’ Executive member for housing, said: “Boroughs are committed to doing their best for homeless families. They continue to develop ways to reduce the costs of temporary accommodation and are considering the recommendations of this report. But without sufficient resources, it is becoming harder and harder to find suitable accommodation for London’s growing homeless population.

“The Spending Review signalled a change in the administration of the TA management fee but the Government now needs to acknowledge the wider cost of homelessness for London boroughs and review the funding available in light of these pressures.

“The Government must recognise the unique pressures affecting London’s housing market and work with the boroughs to further drive an increase in the supply of suitable permanent homes for families in temporary accommodation to move into, reducing the demand for temporary accommodation.”

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