The Lead Untangles: Is there a simple solution to the homelessness crisis?

Ahead of the Budget, the housing sector is united in calling for Local Housing Allowance rates to be unfrozen – will Reeves listen?

The freeze on LHA has made renting less and less affordable. Pic: Unsplash

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Recent headlines have been dominated by the question of whether Rachel Reeves will put up taxes in the Autumn Budget. But the UK’s homelessness crisis has become so bad that local councils and the wider housing sector are pleading with the government to step in.

Amid record numbers of families living in temporary accommodation, local councils are picking up the bill and being pushed to the brink of financial ruin.

The solution? Unfreeze housing benefit. Experts say this would help renters on low incomes and reduce the financial strain on councils, too.

How does funding for temporary accommodation work?

Local councils have a legal duty to place homeless households in temporary accommodation in most cases.

Councils pay for the accommodation up front and then claim money back from the government. The cost can vary wildly and has risen in recent years due to the reliance on hotels and private housing providers cashing in on the crisis.

Meanwhile, the amount that councils can claim back hasn’t kept pace. They get back the equivalent of 90 per cent of Local Housing Allowance [LHA], which is the maximum someone can claim via housing benefit based on their circumstances.

The key thing is that LHA rates have been frozen since 2011, which means the financial burden of temporary accommodation on local councils has ballooned.

What is the impact of the freeze?

LHA is supposed to allow renters on low incomes to afford the cheapest 30 per cent of properties in their areas, but research by Crisis looking at Zoopla listings found fewer than 3 per cent of private rented homes across Great Britain were affordable based on LHA rates.

This freeze has made renting less and less affordable, but has also meant local councils are losing more and more money when they provide temporary accommodation – known as ‘subsidy loss’.

Demand for temporary accommodation has risen sharply over the last 10 years. The number of households in temporary accommodation in England has reached record levels – 132,410 – which is about double the amount a decade ago.

And new analysis by the Local Government Association has now found the gap between what councils are paying and what they are getting reimbursed is projected to cost them over £3bn from 2017/18 to 2029/30.

In 2023/24, the most recent year for which we have data, the total subsidy gap was £266m, which is expected to be even higher in 2024/25, and rise to £400m a year by the end of the decade.

In some cases, the funding pressures of temporary accommodation is even putting councils at risk of bankruptcy.

What exactly is the housing sector calling for?

In October, a coalition of 40 groups from the housing sector wrote a letter to the government calling for LHA rates to be unfrozen as a way of tackling homelessness and easing the financial strain on councils.

Matt Downie, chief executive at Crisis, said: “Ministers must unfreeze housing benefit at the Autumn Budget, so that it covers at least the cheapest 30 per cent of private rents in a local area. In the immediate term, this is the most effective way to prevent homelessness rising further and to support people into settled homes within the private rented sector.

“Without this, the UK government risks failing in its efforts to tackle homelessness, and councils will be forced to keep spending billions of pounds each year on poor-quality temporary accommodation.”

Florence Eshalomi, chair of the Housing, Communities and Local Government [HCLG] committee, said: “Our committee heard compelling evidence that the decision to re-freeze LHA rates will leave families unable to afford private sector rents and place them at risk of homelessness.”

She described this as a “false economy” that “undermines the additional funding for [council] homelessness services.”

“At the Budget, the chancellor should look again at LHA and carefully consider the impact that freezing LHA is having on our homelessness services and families struggling to make ends meet.”

What is the government going to do about it?

Housing secretary Steve Reed’s appearance before the HCLG committee earlier this month may have given councils green shoots of hope.

He said conversations about potential changes to LHA are underway between his department, the DWP and the Treasury.

“It’s certainly one of the causes that is driving, particularly in London, the higher rates of families in temporary accommodation,” he said. “That is something we wish to reduce – not just because of the costs it places on local authorities who are having to deal with it but also for the huge damage it does to kids growing up.”

However, Reed also admitted that the long-awaited homelessness strategy may not come out until next year.

Much of the build up to chancellor Rachel Reeves’ Autumn Budget has focused on how she is going to raise more income to fill a £30bn blackhole in the public finances, which makes any big increases in spending unlikely.

We will find out next week if she is listening to the SOS from the housing and local government sector.■

About The Lead Untangles: In an era where misinformation is actively and deliberately used by elected politicians and where advocates and opposers of beliefs state their point of view as fact, sometimes the most useful tool reporters have is to help readers make sense of the world. If there is something you’d like us to untangle, email ella@thelead.uk

About the author: Matty Edwards is a freelance journalist based in Bristol who mostly writes about housing, local politics and the environment. He was previously a reporter and editor at local media cooperative the Bristol Cable between 2018 and 2025.

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