The cost of temporary accommodation to councils in England is projected to rise to nearly £4 billion by 2029/30 unless urgent action is taken to reform the way local authorities are reimbursed, according to new analysis published by the Local Government Association.
The study highlights the widening “Temporary Accommodation Subsidy Funding Gap”, caused by the difference between the housing benefit councils pay to households in temporary accommodation and the amount they can claim back from the Department for Work and Pensions.
Between 2017/18 and 2024/25, councils have spent almost £1.5 billion more on temporary accommodation than they were reimbursed. The LGA warns this gap is accelerating as demand rises and subsidy levels fail to keep pace with real‑world costs.
The funding gap exists because councils can only claim back 90% of 2011 Local Housing Allowance (LHA) rates, despite significant increases in rents and temporary accommodation charges over the last 15 years.
While households receive the full housing benefit they are entitled to, councils must make up the difference themselves, placing severe and growing pressure on local budgets.
If the system remains unchanged, the cumulative shortfall is set to increase to £3.9 billion by 2029/30 – more than double the current figure.
The LGA also projects:
- The annual funding gap will grow by 65%, rising from £360 million today to £595 million within five years
- In 2024/25, councils spent £1.27 billion on housing benefit for temporary accommodation, but only £911 million was reimbursed
- This left councils with an annual shortfall of almost £360 million
The LGA is urging the Government to uprate the subsidy councils can claim to 90% of current LHA rates, not 2011 levels. Doing so would reduce the projected cumulative cost to councils by 37%, saving £1.5 billion by 2029/30.
Cllr Tom Hunt, Chair of the LGA’s Inclusive Growth Committee, said:
“The temporary accommodation subsidy gap is a problem that is getting worse each year but is fixable. This would have a huge boost to council finances, money which could go towards preventing homelessness and building the homes that our communities desperately need.
“Yet because of this ever-widening issue councils are caught in a vicious cycle of ever-increasing temporary accommodation costs versus static rates they receive back to cover their costs.
“We urge the Government to uprate housing benefits to 90 per cent of the current LHA rate – this outlay could yield significant results for the economy and national wellbeing.”
England currently has 132,000 households living in temporary accommodation, with 172,000 children affected.
Rising homelessness, increasing rents, and a shortage of affordable housing have sharply driven up demand for temporary accommodation. Councils say they are increasingly struggling to meet legal obligations while managing escalating costs.
The LGA warns that without decisive action, the situation will continue to deteriorate – both for local authority budgets and for families experiencing homelessness.
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