Councils in England facing bankruptcy as lack of housing pushes up costs
England’s housing crisis will push many local authorities into bankruptcy as the increasing cost of emergency accommodation for thousands of homeless families threatens to overwhelm council budgets, leaders have warned.
The worst-hit councils are now spending millions of pounds a year – in some cases between a fifth and half of their total available financial resources – to try to cope with an unprecedented and rapid explosion in homelessness caused by rising rents and a shrinking supply of affordable properties.
The scale of the crisis means smaller councils, often in affluent shire counties, are struggling to supply enough emergency homes to meet their legal duty to support homeless families. Homelessness rates in some districts have more than doubled year on year.
Councils that have enjoyed housing stability for years are now reeling at the accelerating cost of the crisis. Basildon borough council in Essex has seen spending on temporary accommodation rise from £7,000 in 2017 to £2m in 2022. Hastings borough council, in East Sussex, spent £750,000 in 2019 but expects its annual bill to be £5.6m by next April.
There is cross-party consensus in local government about the need for urgent ministerial action, with even Tory-controlled councils calling for rent controls, increases in housing benefit rates and investment in new social housing to prevent the crisis from dragging smaller districts into insolvency.
“Unless the government acts now, many of us will go over the edge financially, with a devastating impact on local services. The decline of the safety net which district councils provide will hit the most vulnerable members of our communities hardest,” said Hannah Dalton, housing spokesperson for the District Councils’ Network.
A Guardian analysis of local authority revenue expenditure found 10 councils where more than £1 in every £10 of core spending – which is not ringfenced and that councils can use to take decisions – went on temporary accommodation in 2022-23.
Many of these councils have also seen large rises in the number of people housed in temporary accommodation. In Crawley, in West Sussex, the number of households doubled between December 2019 and March this year; in Hastings the number tripled and in Havant, in Hampshire, it grew tenfold, according to government homelessness figures.
The crisis is being driven by rising evictions from private rented housing over the past two years, coupled with local housing benefit cuts and the scarcity of suitable homes as rising mortgage interest rates force landlords to sell up or switch to short-term lets, such as Airbnb, forcing potential first-time buyers to stay in rented homes.
Councils have described increasingly chaotic local private rented housing market conditions as the crisis spreads, including:
Unscrupulous private landlords evicting tenants and then offering the property to the local council to use as temporary accommodation and charging a substantially higher rent – a process known as “flipping”.
Families increasingly being placed in temporary housing miles from where they live and far from their children’s school. District councils in Essex routinely house families in Norfolk and Cambridgeshire, and one family was reportedly placed in Inverness, in northern Scotland.
Councils are in direct competition with the Home Office, and its asylum seeker housing contractors, Serco and
Clearsprings, to secure scarce temporary accommodation in their area. Some councils are considering offering “golden hello” cash payments to landlords to secure priority access to homes.
The latest figures for England published last week showed a record 104,000 households in temporary accommodation, at a cost to the taxpayer of £1.7bn. Councils said these figures have been swelled by growing numbers of working families made homeless after being turfed out by landlords wishing to sell up or raise rents.
Stephen Robinson, the Liberal Democrat leader of Chelmsford city council, said: “As a country, we’ve not built enough homes for 30 years. If the crisis in homelessness is not addressed, it could bankrupt very many district and unitary councils within two years, with those in south-east England at particular risk.”
Labour-run Hastings, which has said it in effect faces bankruptcy as a consequence of rising temporary accommodation bills, said in a recent paper that the financial and social consequences were so serious that “even the term ‘housing crisis’ insufficiently conveys the systemic and embedded challenges we face”.
A spokesperson for the government said ministers were committed to ensuring that families could move out of temporary accommodation into stable housing. “Local authorities have seen an increase in core spending power of up to £5.1bn or 9.4% in cash terms on 2022-23, with almost £60bn available for local government in England.
“We are committed to reducing the need for temporary accommodation by preventing homelessness before it occurs in the first place, which is why we are providing councils with £1bn through the homelessness prevention grant over three years.”