Local Government on the rack

Tom Miller says the homelessness crisis is dismantling local government

Readers will be familiar with the financial crisis engulfing local government, a long-running and unresolved legacy of the ruinous austerity politics undertaken by the previous government. Despite welcome moves such as a longer budgeting cycle, an increasing number of Councils have successfully approached government to make ‘above cap’ Council tax rises in England.

This has included authorities as diverse as Bradford, Windsor and Maidenhead, Newham, Somerset and Trafford, with rises in some cases up to 10%.

Underlying the increasing vulnerability of Councils is the extraordinary surge in costs associated with “temporary” (i.e. emergency) accommodation for homeless people. Councils are obliged to house the majority of homeless people, in temporary accommodation if necessary, until the duty is ‘discharged’.

Council spending on emergency accommodation jumped by a staggering 80% in the financial year running up to March 2024, and similar numbers are expected for the financial year, which is currently wrapping up. According to LSE research carried out for Crisis, spending leapt to £732 million from £411 million the year before. The numbers are a severe mismatch for the actual growth in demand, which increased by 24%, from 45,000 to 56,000 families.

For perspective, in 2018, the bill was £136 million, so temporary accommodation now costs councils 5.4 times the amount of money it did in 2018.

The disproportionate rise in cost shows that the market for emergency accommodation, often in the form of B&Bs, is now stretched to capacity. Behind this lies a further cause, with three times more refugees and asylum seekers being left homeless after being asked to leave Home Office-sponsored accommodation.

Households stay far longer in “temporary” accommodation than they should, with one in ten staying for five years or more. This leads to far worse life outcomes for individuals, with a knock-on effect for wider society. A range of negative impacts (to health, criminal justice, education, and substance misuse) were estimated to be £3.1 billion in 2023/24, with £733 million attributed to productivity losses

The Labour government is taking action to redress some causes of the rise, taking forward a long overdue ban on Section 21 “no fault” evictions, improving rights and licensing regimes for tenants, and reforming planning rules to kick off a wave of social home building.

More social housing is a long-term remedy, and even then it will not be sufficient to impact rising housing lists. In the short term, we need quick fixes that specifically address the cohorts who need emergency accommodation, and address the specific issues arising from refugees and those seeking asylum. With a saturated market in private rents, social housing, and now temporary accommodation, the medium-term picture for these groups is depressing, and the costs to local government and wider society do not look like going away.

At this stage, one of the best things the government could do to increase stability and reduce costs to local government would be to adopt a specific national policy aimed at housing refugees and asylum seekers who need accommodation in the short term. Councils could be funded to build specifically adapted accommodation for these purposes, using capital to reduce revenue costs. Alternatively, the central government could build specialist accommodation, but the risks of creating a humanitarian disaster along the lines of the Bibby Stockholm prison barge are significant.

There are other, more immediate steps that the left should campaign for. We need the central government to unfreeze the temporary accommodation subsidy cap and revise this down over time by building extra capacity.

It would also be helpful for the government to unfreeze Local Housing Allowance (frozen since 2011), which supports private renters. London Councils has recommended a particular change to aid under-35 asylum seekers, the most affected group. For refugees under 35, Local Housing Allowance entitlement is capped at the lower ‘shared accommodation’ rate. This places the vast majority of privately rented properties out of reach.

However, as with the other financial remedies outlined above, this is also dependent on supply and the landlord-owned private rental sector. It would only be useful if complemented with a material remedy – building much more accommodation at social or near social rents.

There are no quick fixes for local government, but the key demands on its finances are clear and are not without remedy. It is not enough for the left to simply demand that local government be properly funded.

Anyone on the left will accept the need to revise how we finance social goods, but genuine socialist localism addresses root causes. We must concern ourselves with material change in favour of the less well off. By reducing social and financial costs, this would drive greater efficiency in public spending and support a more productive private sector. The UK must build to address the specific short-term problem before building at the right price points to change the housing market in the long term.