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.”
Read more
Why is the UK’s rental market in chaos?
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.”
A former Conservative cabinet minister has thrown his hat into the ring to become the inaugural chair of Britain’s new independent football regulator.
Sky News has learnt that Chris Heaton-Harris, who stood down as an MP at July’s general election, is among those who applied for the role ahead of a deadline on Friday.
Mr Heaton-Harris is himself a qualified football referee who has officiated at matches for decades.
A former Northern Ireland secretary and chief whip under Rishi Sunak and Boris Johnson respectively, he said in 2022 of his part-time career as a football official: “I took a [refereeing] course and that was it, I’ve been going ever since.
“Football has done wonders for me throughout my life so I would recommend it to everybody.”
Mr Heaton-Harris is among a large number of people who have applied for the role of chair at the Independent Football Regulator (IFR), according to officials.
A publicly available timetable for the search says that interviews for the £130,000-a-year post will end on 11 December, with an appointment expected in the new year.
It is the second time that the government has embarked on a search for a chair for the IFR after an earlier hunt was curtailed by the general election.
The role will be based at the watchdog’s new headquarters in Manchester and will require a three-day-a-week commitment.
The Football Governance Bill had its second reading in the House of Lords this week, as part of a process that will represent the most fundamental shake-up in the oversight of English football in the game’s history.
The Labour administration has dropped a previous stipulation that the regulator should have regard to British foreign and trade policy when determining the appropriateness of a new club owner.
The IFR will monitor clubs’ adherence to rules requiring them to listen to fans’ views on issues including ticket pricing, while it may also have oversight of the parachute payments made to clubs in the years after their relegation from the Premier League.
The top flight has issued a statement expressing reservations about the regulator’s remit, while it has been broadly welcomed by the English Football League.
The IFR’s creation will come with the Premier League embroiled in a civil war over Manchester City‘s legal battles emanating from allegations that it breached the competition’s financial rules.
Keep up with all the latest news from the UK and around the world by following Sky News
Next week, the 20 Premier League clubs will meet for a lengthy shareholder meeting, with a vote on amended Associated Party Transaction rules hanging in the balance.
The league needs 14 clubs to vote in favour for the rule changes to be passed.
Contrary to earlier expectations, however, a detailed discussion on a financial distribution agreement between the Premier League and EFL is unlikely to be on the agenda.
A Department for Culture, Media and Sport spokesperson said: “The process for recruiting the Independent Football Regulator chair is under way but no appointment decisions have been made.
“We do not comment on speculation.”
This weekend, Mr Heaton-Harris could not be reached for comment.
Pizza Hut’s biggest UK franchisee has begun approaching potential bidders as it scrambles to mitigate the looming impact of tax hikes announced in last month’s Budget.
Sky News has learnt that Heart With Smart (HWS), which operates roughly 140 Pizza Hut dine-in restaurants, has instructed advisers to find a buyer or raise tens of millions of pounds in external funding.
City sources said this weekend that the process, which is being handled by Interpath Advisory, had got under way in recent days and was expected to result in a transaction taking place in the next few months.
HWS, which was previously called Pizza Hut Restaurants, employs about 3,000 people, making it one of the most significant businesses in Britain’s casual dining industry.
It is owned by a combination of Pricoa and the company’s management, led by chief executive Jens Hofma.
They led a management buyout reportedly worth £100m in 2018, with the business having previously owned by Rutland Partners, a private equity firm.
One source suggested that as well as the talks with external third parties, it remained possible that a financing solution could be reached with its existing backers.
HWS licenses the Pizza Hut name from Yum! Brands, the American food giant which also owns KFC.
Insiders suggested that the increases to the national living wage and employers’ national insurance contributions (NICs) unveiled by Rachel Reeves would add approximately £4m to HWS’s annual costs – equivalent to more than half of last year’s earnings before interest, tax, depreciation and amortisation.
One added that the Pizza Hut restaurants’ operation needed additional funding to mitigate the impact of the Budget and put the business on a sustainable financial footing.
The consequences of a failure to find a buyer or new investment were unclear on Saturday, although the emergence of the process comes amid increasingly bleak warnings from across the hospitality industry.
Keep up with all the latest news from the UK and around the world by following Sky News
Last weekend, Sky News revealed that a letter co-ordinated by the trade body UK Hospitality and signed by scores of industry chiefs – including Mr Hofma – told the chancellor that left unaddressed, her Budget tax hikes would result in job losses and business closures within a year.
It also said that the scope for pubs and restaurants to pass on the tax rises in the form of higher prices was limited because of weaker consumer spending power.
That was followed by a similar letter drafted by the British Retail Consortium this week which also warned of rising unemployment across the industry, underlining the Budget backlash from large swathes of the UK economy.
Even before the Budget, hospitality operators were feeling significant pressure, with TGI Fridays collapsing into administration before being sold to a consortium of Breal Capital and Calveton.
Sky News recently revealed that Pizza Express had hired investment bankers to advise on a debt refinancing.
HWS operates all of Pizza Hut’s dine-in restaurants in Britain, but has no involvement with its large number of delivery outlets, which are run by individual franchisees.
Accounts filed at Companies House for HWS4 for the period from 5 December 2022 to 3 December 2023 show that it completed a restructuring of its debt under which its lenders agreed to suspend repayments of some of its borrowings until November next year.
The terms of the same facilities were also extended to September 2027, while it also signed a new 10-year Pizza Hut franchise agreement with Yum Brands which expires in 2032.
“Whilst market conditions have improved noticeably since 2022, consumers remain challenged by higher-than-average levels of inflation, high mortgage costs and slow growth in the economy,” the accounts said.
It added: “The costs of business remain challenging.”
Pizza Hut opened its first UK restaurant in the early 1970s and expanded rapidly over the following 15 years.
In 2020, the company announced that it was closing dozens of restaurants, with the loss of hundreds of jobs, through a company voluntary arrangement (CVA).
At that time, it operated more than 240 sites across the UK.
Mr Hofma and Interpath both declined to comment.
The UK economy grew by 0.1% between July and September, according to the Office for National Statistics (ONS).
However, despite the small positive GDP growth recorded in the third quarter, the economy shrank by 0.1% in September, dragging down overall growth for the quarter.
The growth was also slower than what had been expected by experts and a drop from the 0.5% growth between April and June, the ONS said.
Economists polled by Reuters and the Bank of England had forecast an expansion of 0.2%, slowing from the rapid growth seen over the first half of 2024 when the economy was rebounding from last year’s shallow recession.
And the metric that Labour has said it is most focused on – the GDP per capita, or the economic output divided by the number of people in the country – also fell by 0.1%.
Reacting to the figures, Chancellor of the Exchequer Rachel Reeves said: “Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers,” she said in response to the figures.
“At my budget, I took the difficult choices to fix the foundations and stabilise our public finances.
“Now we are going to deliver growth through investment and reform to create more jobs and more money in people’s pockets, get the NHS back on its feet, rebuild Britain and secure our borders in a decade of national renewal,” Ms Reeves added.
The sluggish services sector – which makes up the bulk of the British economy – was a particular drag on growth over the past three months. It expanded by 0.1%, cancelling out the 0.8% growth in the construction sector
The UK’s GDP for the the most recent quarter is lower than the 0.7% growth in the US and 0.4% in the Eurozone.
The figures have pushed the UK towards the bottom of the G7 growth table for the third quarter of the year.
It was expected to meet the same 0.2% growth figures reported in Germany and Japan – but fell below that after a slow September.
The pound remained stable following the news, hovering around $1.267. The FTSE 100, meanwhile, opened the day down by 0.4%.
The Bank of England last week predicted that Ms Reeves’s first budget as chancellor will increase inflation by up to half a percentage point over the next two years, contributing to a slower decline in interest rates than previously thought.
Announcing a widely anticipated 0.25 percentage point cut in the base rate to 4.75%, the Bank’s Monetary Policy Committee (MPC) forecast that inflation will return “sustainably” to its target of 2% in the first half of 2027, a year later than at its last meeting.
The Bank’s quarterly report found Ms Reeves’s £70bn package of tax and borrowing measures will place upward pressure on prices, as well as delivering a three-quarter point increase to GDP next year.
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