The freezing of local housing allowance (LHA) rates over the past five years has left councils picking up more than £700 million in costs that they are unable to claim back from government for housing people in temporary accommodation, according to LGA analysis of official data.
Homeless households placed in temporary accommodation can claim housing benefit, which councils pay upfront and are reimbursed for by the Department for Work and Pensions.
But while households receive the full housing benefit to which they are entitled, the amount councils can claim back from government is currently capped at 90 per cent of LHA rates for 2011.
With rising rental prices, the amount councils can claim no longer covers the cost of temporary accommodation, leaving local authorities to cover the ever-widening gap. This gap is in addition to the huge sums of money that councils pay over and above housing benefit limits to meet the total cost of temporary accommodation, which reached £1.75 billion in 2022/23 alone.
The LGA says this gap threatens councils’ financial viability and hampers efforts to reduce homelessness. It is calling on the Government to uprate temporary accommodation subsidy rates to 90 per cent of 2024 LHA rates and to reconsider its decision to keep LHA rates frozen for other types of accommodation until at least April 2026, to protect councils from ongoing spiralling homelessness costs.
Cllr Adam Hug, LGA Housing Spokesperson, said: “Council housing budgets are being stretched to the limit and they must not keep being left to bridge the gap between rent and the amount we are able to recover via housing benefit subsidy. We need urgent government action to address the subsidy gap, alongside the creation of a more effective housing and welfare system that reduces – and, ideally, eliminates – reliance on temporary accommodation in the long term.”