Changes in the allocation of the Homelessness Prevention Grant mean that councils are facing a £76 million shortfall in their temporary accommodation budgets, the LGA has warned.
In 2023/24, councils spent nearly £2.3 billion on temporary accommodation, with £1.06 billion covered by reserves or grant funding.
However, under new arrangements for 2024/25, at least 49 per cent of the £633 million Homelessness Prevention Grant must be allocated to prevention and relief activities, leaving only £322.83 million for temporary accommodation. This means there is a £76 million reduction compared with the previous year, forcing councils to plug the gap with already-stretched reserves.
The LGA has warned that the temporary accommodation subsidy gap – the shortfall between actual accommodation costs and Department for Work and Pensions funding – was £204.5 million in 2022/23. Without urgent intervention, councils may struggle to fulfil their statutory housing obligations.
The LGA is calling on the Government to remove the ringfence on grant funding and increase the temporary accommodation subsidy to 90 per cent of the prevailing local housing allowance rate. This would ease financial pressures and allow councils to focus on preventing homelessness.
Cllr Adam Hug, the LGA’s Housing Spokesperson, said: “While it is right to focus on prevention, this sudden shift in funding allocation without a suitable transition period risks exacerbating financial pressures. An uprating of the temporary accommodation subsidy is desperately needed to address the growing cost burden on councils.”