London councils close to bankruptcy as demand for social housing and homelessness skyrockets

Homelessness and the housing crisis are having a “devastating impact” on Londoners including one woman, and her two children, who have been in temporary accommodation for three years.

Sara has been living in hostels across the capital after she left a relationship and found herself homeless.

The hostels are the only accommodation the council have been able to provide.

"We have a small shower room and it's shared kitchen facilities with the rest of the tenants in the building, this is where we are sharing a bunk bed," she explained.

"[It's] Incredibly challenging, I don't even know how to put it into words, my youngest has just come out of the toddler stage and any parent knows how intense that can be and my oldest has just started high school.

"I'm not sure how else to describe it, day to day tasks are very challenging, managing the needs of the children, mine just get pushed to the very bottom."

“Skyrocketing” numbers of homeless people requiring temporary accommodation and the growing strain on social housing budgets means several local authorities in London are edging closer to effective bankruptcy, it is claimed.

London Councils estimates more than 175,000 individuals are now living in temporary accommodation arranged by their local council, equivalent to one in 50 residents in the city.

This means on average there is at least one homeless child in every London classroom, with London accounting for 56% of England’s total number of homeless households in temporary accommodation.

Sara just hopes her and her family can live in a stable household.

She continued: "My solace is sitting in the bathroom on a foot stool, and that's the bathroom, living room slash dining room, so that's the reality of being in a hostel room.

"The youngest often expresses she doesn't wanna be here...she wants to be in a new house in a rainbow room, and I want to give it to her and for my eldest to have some sort of space where he can do his studies uninterrupted.

"That would be really nice, somewhere stable we can call home."

London Councils’ latest survey of members showed the number of homeless households living in temporary accommodation rose by 10% to 60,959 between April 2023 and April 2024.

The shortage of available accommodation has made councils increasingly reliant on expensive options such as commercial hotels, the body said, with London authorities collectively spending around £90 million per month – approximately £3 million every day – on temporary accommodation.

This is an increase of nearly 40% over a year.

London Councils forecasts this will help drive boroughs’ collective budget shortfall across all services to at least £700 million next year unless the Government provides more funding.

The group said stabilising council finances is critical to councils’ efforts to help “tackle the housing crisis, drive economic growth, and invest in the preventative services that bring long-term benefits to Londoners”.

"I've been told to be patient, I understand that a lot of councils are in the same predicament that my council are in, they don't have the resources so they can't really give a timeframe of when people like myself are in these circumstances and when they're going to be moved," Sara explained.

Claire Holland, chairwoman of London Councils and Labour leader of Lambeth Council, said: “The housing crisis is having a devastating impact on Londoners’ lives and wreaking havoc on town hall finances across the capital.

“At a time when we need to invest in social housing and support homeless Londoners, boroughs are facing an unrelenting squeeze on our resources.

“The unavoidable reality is that spiralling costs and years of underfunding threaten to break boroughs’ budgets.

“The current outlook is bleak, but we are committed to working with the Government to find a better way forward.

“The upcoming Budget is a crucial chance for the Government to restore much-needed stability to council finances and the local services we provide.

“This will enable boroughs to play our part in tackling the capital’s housing crisis and driving economic growth in London and across the country.”

Three London boroughs – Croydon, Havering, and Lambeth – are currently reliant on exceptional financial support from the Government.

London Councils said this figure could rise to seven next year.

In 2023-24, 29 of the 33 London boroughs overspent their homelessness budgets by a collective total of £208 million.

A Ministry of Housing, Communities and Local Government spokesperson said: “We are facing the most acute housing crisis in living memory, with record levels of homelessness and too many families living in temporary accommodation in our towns and cities, including in London.

“We are taking action and developing a long-term strategy with councils and local leaders to end homelessness for good.

“We’ll also provide councils with more funding stability, end competitive bidding for pots of money and reform the local audit system.”

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