Councils paying millions more for temporary accommodation in social housing shortage
An extra £118m, at least, will be spent this year on temporary accommodation, such as hotels and B&Bs, by councils, a Sky News investigation has found.
If trends continue, local authorities in England will spend nearly a quarter more (24%) this financial year than pre-COVID-19.
Outside London, expenditure is on track to increase by 55%.
The number of families living in temporary accommodation (TA), as a proportion of the population, has also risen by 8%.
Around £309m was spent by councils on TA in the six months to September, and they are expected to spend well over £618m this financial year.
That’s compared with £500m in the year to March 2020.
The true figure will be much higher because out of more than 300 local authorities contacted, through freedom of information requests, only 180 responded with comparable data.
The biggest increases in TA spending since before the pandemic have been in Yorkshire and the Humber and the South West.
The biggest rises have been in St Helens, Rossendale, Torridge, Sunderland and Wigan.
Torridge district council, in Devon, one of the worst affected, has a forecast for TA expenditure of £1.1m this year, an increase of more than 2,000%.
Devon is a case study in itself, bearing the brunt of external housing market pressures.
There are 70% fewer properties available to rent there than in 2018 and the cost of rented accommodation has also risen by 42%.
It is also believed that in Torridge, a “tourist hotspot”, a “significant number” of properties are being let as holiday homes.
Torridge district councillor Rachel Clarke, lead for homelessness and housing need, told of “unprecedented pressures” with “modest reimbursement” from the government.
“The council is facing significant challenges in finding affordable rented accommodation for residents in temporary accommodation, and hence their stays in TA are longer,” Ms Clarke said.
“The cost pressures associated with temporary accommodation is by far the biggest cost pressure this council faces.”
Sally O’Malley and her son Ollie were evicted from their privately rented home
More children in temporary accommodation
The latest government figures also show that the number of families with children living in TA in England, outside London, has risen by more than 20%.
Sally O’Malley and her son Ollie, 12, are one of those statistics.
They lived in a hotel, followed by a B&B, after she was made homeless through a “no fault” section 21 eviction.
She was told, like many are, that she would not be eligible for help from the authorities until the day she became homeless.
Ms O’Malley, 49, who is from Leeds, was evicted from her privately rented house and describes the ordeal as “traumatising” and “hell”:
“I wouldn’t wish it on my worst enemy… horrible. We got to the stage where I really wanted to give in,” she said.
“Then I’d beat myself up cos how could I think that with Ollie? I had no fight left. I didn’t want to do one more phone call, one more email. I totally lost myself, I was drowning.”
She is now in rented accommodation paid for through her housing allowance but, as it doesn’t cover the cost of rent, is topped up by the local council.
She is one of thousands going through a cycle of eviction, homelessness, temporary accommodation and then back into an expensive private rental sector.
The councils that responded to information requests have spent £1.98bn on temporary accommodation in the past three and a half years.
Sean Gillespie, a landlord in Hull, says a ‘massive housing crisis’ is on the way
Rising rental costs and falling supply
The reasons behind the rise in costs is partly down to more homelessness in some areas, but also due to the rising cost of accommodation itself.
The supply of privately rented accommodation is dropping, which is partly pushing up prices.
Some councils are also struggling to find places to put people up in, which means they are having to resort to more expensive shorter-term lets.
Sean Gillespie has a portfolio of properties to rent in Hull and blames government legislation for a lack of stock as it forces landlords to sell up.
He claims the most damaging piece of legislation has been “section 24”, which came fully into force last year and means landlords are no longer able to offset financial costs against tax.
“Can you imagine a business, any business, where you can’t offset your costs? How is that possible? It’s now possible to make a loss as a landlord and still pay tax – it’s bonkers,” he said.
“We are not taxed on our profits, we’re taxed at our turnover. Where is the spare money?… We [landlords] don’t want a new Rolex, we just don’t want to sell someone’s house.
“Because that doesn’t help anyone. I really don’t know where people are going to live. There’s going to be a housing crisis. It’s in the post, a massive crisis, it’s catastrophic.”
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Alex Diner, senior researcher of housing policy at the New Economics Foundation, describes temporary accommodation as a “national scandal”.
“We are throwing far more money at the symptom of the problem and far less on addressing the root cause of it,” he said.
“It’s economically illiterate and dysfunctional that we’re allowing ever-increasing amounts of money to pay for that, rather than dealing with the problem at source and building social and affordable housing that the country so desperately needs.”
Lack of social housing the key problem
At the heart of all this is one uniting factor: a distinct lack of social housing.
Think of the housing market as a vicious circle of inequality, with two things happening at the bottom.
One: unaffordable housing has driven more and more people on low incomes into the private rented sector.
Two: social housing stock has been sold off and not replaced and therefore benefit recipients have also been forced increasingly to privately rent.
The fact is the private rental sector has become a substitute for social housing.
In the middle of it, two converging groups of people have begun to compete for the same place to live.
Government figures show 25.7% of households in the private rental sector are in receipt of housing benefit.
If we built more affordable homes, and specifically more social housing, it would slowly take the heat out of the private rented sector and ultimately market sales.
Private rental has become a precarious and increasingly unaffordable sector and is one of the main reasons why taxpayers are spending billions on temporary accommodation.
From an economic perspective it may appear nonsensical, certainly in terms of “levelling up”.
Ultimately, an overreliance on the private rented sector, as more landlords sell up, will only serve to deepen social and housing inequality.
A government spokesperson said: “Temporary accommodation is a last resort, but a vital lifeline for those at risk of sleeping rough.
“We are giving councils £316 million this year to prevent homelessness and help ensure families are not left without a roof over their heads.
“We know people are concerned about rising costs, which is why we have announced the energy price guarantee, to support household with their energy bills over the winter, and a further £37 billion of support for those struggling with the cost of living.”
The UK economy unexpectedly shrank in May, even after the worst of Donald Trump’s tariffs were paused, official figures showed.
A standard measure of economic growth, gross domestic product (GDP), contracted 0.1% in May, according to the Office for National Statistics (ONS).
Rather than a fall being anticipated, growth of 0.1% was forecast by economists polled by Reuters as big falls in production and construction were seen.
It followed a 0.3% contraction in April, when Mr Trump announced his country-specific tariffs and sparked a global trade war.
A 90-day pause on these import taxes, which has been extended, allowed more normality to resume.
This was borne out by other figures released by the ONS on Friday.
Exports to the United States rose £300m but “remained relatively low” following a “substantial decrease” in April, the data said.
Overall, there was a “large rise in goods imports and a fall in goods exports”.
A ‘disappointing’ but mixed picture
It’s “disappointing” news, Chancellor Rachel Reeves said. She and the government as a whole have repeatedly said growing the economy was their number one priority.
“I am determined to kickstart economic growth and deliver on that promise”, she added.
But the picture was not all bad.
Growth recorded in March was revised upwards, further indicating that companies invested to prepare for tariffs. Rather than GDP of 0.2%, the ONS said on Friday the figure was actually 0.4%.
It showed businesses moved forward activity to be ready for the extra taxes. Businesses were hit with higher employer national insurance contributions in April.
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The expansion in March means the economy still grew when the three months are looked at together.
While an interest rate cut in August had already been expected, investors upped their bets of a 0.25 percentage point fall in the Bank of England’s base interest rate.
Such a cut would bring down the rate to 4% and make borrowing cheaper.
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Is Britain going bankrupt?
Analysts from economic research firm Pantheon Macro said the data was not as bad as it looked.
“The size of the manufacturing drop looks erratic to us and should partly unwind… There are signs that GDP growth can rebound in June”, said Pantheon’s chief UK economist, Rob Wood.
Why did the economy shrink?
The drops in manufacturing came mostly due to slowed car-making, less oil and gas extraction and the pharmaceutical industry.
The fall was not larger because the services industry – the largest part of the economy – expanded, with law firms and computer programmers having a good month.
It made up for a “very weak” month for retailers, the ONS said.
Monthly Gross Domestic Product (GDP) figures are volatile and, on their own, don’t tell us much.
However, the picture emerging a year since the election of the Labour government is not hugely comforting.
This is a government that promised to turbocharge economic growth, the key to improving livelihoods and the public finances. Instead, the economy is mainly flatlining.
Output shrank in May by 0.1%. That followed a 0.3% drop in April.
Ministers were celebrating a few months ago as data showed the economy grew by 0.7% in the first quarter.
Hangover from artificial growth
However, the subsequent data has shown us that much of that growth was artificial, with businesses racing to get orders out of the door to beat the possible introduction of tariffs. Property transactions were also brought forward to beat stamp duty changes.
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In April, we experienced the hangover as orders and industrial output dropped. Services also struggled as demand for legal and conveyancing services dropped after the stamp duty changes.
Many of those distortions have now been smoothed out, but the manufacturing sector still struggled in May.
Signs of recovery
Manufacturing output fell by 1% in May, but more up-to-date data suggests the sector is recovering.
“We expect both cars and pharma output to improve as the UK-US trade deal comes into force and the volatility unwinds,” economists at Pantheon Macroeconomics said.
Meanwhile, the services sector eked out growth of 0.1%.
A 2.7% month-to-month fall in retail sales suppressed growth in the sector, but that should improve with hot weather likely to boost demand at restaurants and pubs.
Struggles ahead
It is unlikely, however, to massively shift the dial for the economy, the kind of shift the Labour government has promised and needs in order to give it some breathing room against its fiscal rules.
The economy remains fragile, and there are risks and traps lurking around the corner.
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Is Britain going bankrupt?
Concerns that the chancellor, Rachel Reeves, is considering tax hikes could weigh on consumer confidence, at a time when businesses are already scaling back hiring because of national insurance tax hikes.
Inflation is also expected to climb in the second half of the year, further weighing on consumers and businesses.
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