London’s councils overspent on their homelessness budgets by at least £330m last year, as town halls warn that the escalating crisis is pushing them closer to bankruptcy.
The reported overspend was paid out by boroughs in the 2024/25 financial year, and represented a 60 per cent increase compared with what they originally budgeted for.
The figures - produced in a new analysis by the capital’s local government association, London Councils - comes as borough leaders emphasise there is “a growing mismatch” between their temporary accommodation costs and the subsidy they receive for this from the Government.
In 2023/24, the gap was around £96m, but London Councils estimates that the shortfall for 2024/25 reached £140m - an increase of 45 per cent.
Responding to the data, the Ministry of Housing, Communities and Local Government (MHCLG) has insisted that ministers are working to tackle “the root causes of homelessness”, including by boosting affordable house-building.
But local leaders fear that if current trends continue, more boroughs will need emergency support and may even be at risk of issuing Section 114 notices - which effectively serve as declarations of bankruptcy.
In England, councils have a legal duty to provide temporary accommodation to homeless households who qualify for support under housing law. Local leaders argue that this makes it essentially impossible for councils to place strict limits on their homelessness expenditure.
Last year, London boroughs allocated almost £600m to their homelessness budgets for 2024/25. This was based on previous years’ spending and anticipated increases in homelessness pressures.
According to London Councils however, “pressures shot up even faster than expected” and the number of homeless Londoners requiring temporary accommodation has reached the highest level ever recorded - 183,000, or one in 50 residents of the capital. It means boroughs are now collectively spending £4m a day on temporary accommodation.
“The worsening homelessness emergency is devastating the lives of too many Londoners and represents the single biggest risk to boroughs’ finances,” said Grace Williams, London Councils’ executive member for housing.
“Homelessness spending is fundamentally driven by factors outside our control. Boroughs have a legal duty to provide homelessness support - and we’re seeing homelessness numbers skyrocket while accommodation costs spiral.”
Ms Williams, who also serves as Labour leader of Waltham Forest Council, added: “If things carry on as they are, we will see more boroughs’ become effectively bankrupt. This brings massive uncertainty to the future of our communities’ local services, and could ultimately mean more costs to the Government when emergency interventions are required.
“London boroughs are doing everything we can to turn this situation around, but we need urgent action from ministers. Only national government has the powers and resources required to bolster councils’ budgets and reduce homelessness pressures - particularly through investing far more in affordable housing.”
Responding, an MHCLG spokesman said: “We inherited a serious housing crisis which is why we are taking urgent and decisive action to end homelessness, fix the foundations of local government and drive forward our Plan for Change.
“This government is providing £1bn for crucial homelessness services and tackling the root causes of homelessness by building 1.5m new homes, boosting social and affordable housing and abolishing section 21 no fault evictions.”
