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.”
The FTSE 100 has ended a long wait to achieve a new record high.
The index, which comprises the 100 most valuable companies on the London Stock Exchange, closed Monday’s session on 8,023 points following a jump of 128 points or 1.6%.
That was the highest closing sum since February last year when the 8,000 barrier was breached for the first time in its history.
The previous record stood at 8,012.
The performance on Monday was driven by a strong showing for companies across the board, particularly financial and consumer-linked stocks such as those for retailers.
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The index has been gaining ground in recent weeks on growing hopes for a cut in UK interest rates as inflation eases – with strong evidence that the economy has turned a corner after the recession during the second half of last year.
Analysts credited the push for a new high on two main factors; confidence that a major escalation in the Middle East conflict will be avoided and a weakening in the value of the pound against the US dollar.
Sterling is trading at five-month lows against the greenback at just $1.23 and was half a cent down on the day.
This is a consequence of dollar strength as opposed to pound weakness as expectations are growing across the Atlantic that the Federal Reserve’s expected interest rate cuts are further down the track than had been predicted.
Higher interest rates tend to be supportive of a currency which, in this case, is the world’s reserve currency.
A weaker pound helps FTSE 100 constituent companies which make money in the United States.
That is because it boosts their bottom line when those dollar earnings are booked back in the UK and converted back to pounds.
The City of London has been fighting to defend its territory since Brexit
The FTSE has largely lagged growth among its rivals since Brexit and was tamed by a succession of economic shocks but has been reclaiming some ground this year due to perceived low valuations versus competing stocks overseas.
Its lack of technology companies – which have tended to perform best globally since the pandemic – has been another factor behind the FTSE’s malaise.
Trading hubs also point to a competitive disadvantage through a 0.5% transaction tax on share purchases in UK firms.
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AJ Bell investment director Russ Mould is asked if the weaker pound has contributed to Monday’s record high for the FTSE 100.
The index traditionally struggles during times of world economic uncertainty as its 100 constituents are dominated by firms whose fortunes are directly linked to demand for basic commodities such as mining and industrial stocks.
However, the signs of growth starting to emerge are a positive, not only for the FTSE 100 but also pension pots.
The broader and more domestically-focused FTSE 250 is yet to climb back above the 20,000 points level but it saw gains of 1% on Monday.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said of the prospects ahead: “With growth in the UK not shooting the lights out, and inflationary pressures showing signs of easing, there is still optimism around about the prospect of interest rate cuts coming later in the summer, which appears to have helped the FTSE 100 climb higher.
“As lower borrowing costs are forecast later this year, amid a slightly more positive outlook for the economy, housebuilders have also headed sharply higher amid hopes that stronger demand will return for new homes.
“Ocado, J Sainsbury, Next, Marks and Spencer and Tesco have also been lifted amid hopes for more clement conditions for consumers.
“A handful of FTSE 100 listed companies, which breached record levels earlier in the month, are on course to climb back up to those highs, such as Rolls Royce and BAE Systems. Aerospace stocks have been pushed higher by ongoing conflicts and post-pandemic demand.”
The UK’s biggest water company has put forward an investment offer that could increase customer bills even more than the 40% rise it already requested.
Thames Water, which serves 16 million customers in the south of England, has proposed increasing spending by £1.1bn and revealed another potential £1.9bn investment in its network as part of new business plans to regulator Ofwat.
But, if approved, this could mean an additional £19 a year bill increase on top of its inital plan for bill payers to be charged 40% more.
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Even higher bills?
Under the utility’s proposed business plan, for the five years to 2030 bills will rise to £608 a year – a 40% rise.
The average bill is currently £432.60 a year.
But if the extra investment is given the go-ahead, it could mean customers have to pay 44% more instead – £627 a year by 2030.
An investment of £18.7bn had already been proposed but under revised plans an extra £1.1bn has been offered to go into “projects benefiting the environment”, Thames Water said.
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Regulatory approval is required for the plans, and Ofwat is due to publish its draft view on 12 June.
What’s going on at Thames Water?
Thames Water has had to rethink its business plan as it faces collapse under the weight of £15bn of debt.
Investors have refused to pump a previously agreed £500m into the business, leading its parent company to default on some of its debt.
Thames Water has blamed Ofwat for this, saying it had imposed regulations that made it “uninvestable”.
The government is reportedly drafting plans to bring the water giant under state control in the event of its collapse.
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Sky’s Paul Kelso takes a look at what the future holds for Thames Water and how it is under threat of nationalisation.
The company had £2.4bn cash available in February, enough for it to remain solvent until next year.
It is said to be in discussions with its existing shareholders – which include the Universities Superannuation Scheme (USS), China’s sovereign wealth fund, a Canadian pension fund, and the BT Pension Scheme.
The company has also come under intense scrutiny after missing sewage spill and leakage targets.
Thames Water said it discussed the original business plan “extensively with regulators and key stakeholders”.
An Ofwat spokesperson said: “Since October we have been in discussions with all companies, checking on their proposed plans and seeking further information.
“There has also been further information published in the last few months clarifying companies’ statutory commitments. Both these factors have required companies to review their proposed plans and revise their expenditure forecasts to reflect what would be required to fully comply with all statutory requirements.”
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