Rocketing cost of housing homeless people putting councils on brink of ruin

By Lewis Denison, Westminster Producer

The rocketing cost of housing homeless people in temporary accommodation is putting local authorities on the brink of financial ruin, dozens of council leaders have warned.

A number of councils effectively went bankrupt last year and many are hanging on by a thread. Leaders are now demanding emergency funding from the Westminster government so they can avoid slashing frontline public services.

It comes amid crippling financial pressures from rising living costs, unaffordable rents and a "severe lack" of social homes, which charity Crisis says are forcing "more and more" people into homelessness.

Stephen Holt, the leader of Eastbourne Borough Council - which is currently spending 49p in every £1 on temporary accommodation for homeless people - said ministers must "recognise the gravity of this situation" and work out how to resolve it "before it is too late".

The Liberal Democrat councillor told a gathering of 50 council leaders in Westminster that the government must prevent a “national crisis” by unfreezing the cap on temporary accommodation placements – which has been in place since 2011.

He said: “Simply put, without government intervention to tackle the tremendous cost of temporary accommodation and homelessness, the next step for many councils of all stripes is emergency budgets and section 114 notices.”

A 114 notice, which was declared by both Nottingham and Birmingham councils last year, is the local authority equivalent of a business declaring bankruptcy.

On Tuesday, 44 Conservative MPs threatened Rishi Sunak with rebellion if he does not announce emergency funding for local councils.

They warned the PM in a letter that they are "exceptionally concerned" that families will be faced with a "double whammy" of reductions in services and higher council tax rates without intervention from central government.

Seven councils in total have issued 114 notices since 2020, out of a total of 317 and several have recently had to make cuts in order to stay afloat.

In December, ITV News learned that almost one in five council leaders in England expect to do the same this year.

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Ben Bradley, who is both the leader of Nottinghamshire County Council and the MP for Mansfield North, said: "County and unitary councils across the country are currently setting out their budgets for next year, with many proposing substantial reductions to highly valued local services as well as tightening of eligibility for care services.

"With council tax set to rise again this year, residents face a double whammy."

The County Councils Network, which represents 23 counties and 13 unitary authorities, said ministers must "provide emergency funding for councils to prevent substantial cuts to local services, or worse, some authorities facing financial insolvency".

Cost-of-living crisis and asylum claimants thought to be behind rise in homelessness

Homelessness charity Crisis suggested the cost-of-living crisis is to blame for a spike in the need for temporary accommodation but a Labour councillor suggested asylum seekers are also having an impact.

According to Crisis, some 298,430 households approached their local council for homelessness support in the past year.

Jasmine Basran, head of policy and campaigns at Crisis, said: “We cannot ignore how crucial homelessness services are right now for people pushed to the brink.

"Crippling financial pressures from rising living costs, unaffordable rents and a severe lack of social homes is forcing more and more people into homelessness."

Michael Jones, Labour leader of Crawley Borough Council, said costs and homelessness were “accelerating” and stressed the town had become “an asylum dispersal city by the back door” which is driving “new demands”.

Referring to the frozen funding regime, he added: “It is simply unjust and needs rectifying now.

“This crisis in temporary accommodation is a challenge that would have been insurmountable even for the most well-resourced councils at the best of times, so I don’t think it is over-dramatic given the pressures facing councils to tell the Government that they are presiding over the end of local government if they fail to take the urgent action needed.”

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