New study puts cost of temporary accommodation in London at £663m in 2015

Posted on 14 November 2016

Julie Rugg featured on BBC Radio 4 programme - File on 4

Dr Rugg's  research found that local authorities spend £170m to meet benefit 'saving'. Julie writes: London Councils commissioned the Centre for Housing Policy to estimate how far London boroughs themselves were meeting the cost of a reduction in housing benefit support for households in temporary accommodation. The Department for Work and Pensions has frozen the Local Housing Allowance payments made for households who have become homeless through no fault of their own. However, rents in London have increased, and local authorities are increasingly meeting the shortfall. In essence, the benefit expenditure has simply been shifted from the DWP to London boroughs, with no saving to the taxpayer.

Dr Rugg can be heard on BBC Radio 4's File on 4 explaining her research.

Julie continues: between 2010 and 2014 there was a 77 per cent increase in the number of households accepted as homeless in London. The end of an assured shorthold tenancy in the private rented sector is now the biggest reason why households present as homeless. Before 2010 the Government had been successful in reducing reliance on temporary accommodation; however, since 2011, the numbers have again started to rise.

In addition, the ‘unit’ cost of temporary accommodation has also increased as the market for temporary accommodation has changed. Landlords serving the TA market are now more likely to offer accommodation on a ‘nightly’ basis rather than leased by a local authority over a longer period. This is much more lucrative for the supplier, but more problematic for local authorities.

Local authorities receive a specific subsidy from the Department for Work and Pensions to cover the cost of temporary accommodation. The ‘rent’ component is based on the local housing allowance (LHA) payment that any tenant in need of support might receive. However, for temporary accommodation, the cost is limited to 90 per cent of the LHA rate, since it was assumed that landlords would charge less since local authorities were essentially taking over management of their property. In 2011, the 90 per cent LHA rate was frozen despite general increases in London rents. Local authorities are also given £40 per week per tenancy to cover the management cost of temporary accommodation. However, this management subsidy is now generally used to cover the shortfall between the LHA and the rent. Landlords in London have no incentive to reduce rents in line with the LHA: they can generally find an alternative tenant not reliant on benefit.

Notes to editors:

Julie Rugg - Profile

Julie has been a Senior Research Fellow with the Centre for Housing Policy (https://www.york.ac.uk/chp/) since 1993. She has completed work including qualitiative research on welfare and its impact on claimant and landlord behaviour, aspects of the private rented sector and young people's housing biographies.

Recent and ongoing projects include two studies for the Scottish Executive on deposit guarantee schemes and lead tenancy schemes; and an evaluation of the Tenancy Deposit Scheme for the the Department for Communities and Local Government. She was part of the consortium evaluating the Standard Local Housing Allowance Pathfinders for the Department for Work and Pensions, heading up the stream analysing landlord behaviour under the new benefit regulations. Her most recent project was an independent Review of the Private Rented Sector, published October 2008.