LGA Warns Of £3bn Temporary Accommodation Funding Black Hole

New analysis from the Local Government Association (LGA) reveals that councils in England are facing a cumulative £3 billion shortfall in temporary accommodation funding between 2017/18 and 2029/30, a gap the organisation says is pushing local government finances to breaking point.

The LGA’s assessment comes days before the Autumn Budget and highlights a longstanding flaw in the way councils are reimbursed for housing benefit in temporary accommodation (TA). While households receive their full entitlement, councils can only claim back 90% of 2011 Local Housing Allowance (LHA) rates. With rents rising sharply and demand for TA at record levels, councils are left funding the difference.

In 2023/24, councils spent £1.05 billion on housing benefit for households in temporary accommodation. The Department for Work and Pensions reimbursed £780 million, leaving a £266 million gap. With overall TA spending reaching £2.8 billion in 2024/25, the subsidy gap is expected to widen further.

The LGA warns that without reform, the annual shortfall will increase by almost 50% over the next five years, from around £270 million today to nearly £400 million a year by 2029/30.

To ease the pressure, the LGA is calling on the Government to uprate the subsidy rate so councils can reclaim 90% of current LHA levels. This change would reduce the projected cumulative deficit by £700 million by 2029/30.

The findings come amid record demand, with 132,410 households, including 172,420 children currently living in temporary accommodation.

Cllr Tom Hunt, Chair of the LGA’s Inclusive Growth Committee, said the Chancellor must act in the Autumn Budget:

“It makes no sense that the rates councils receive are a decade and a half old. The LHA rate must be brought into line with the current reality.”

Read the full analysis report here