Councils fear bankruptcy amid homelessness crisis

Homelessness represents the "single biggest risk" to council finances and may cause effective bankruptcy, according to the organisation that represents London boroughs.

London Councils, a cross party group that represents all 32 boroughs and the City of London, estimated that councils in the capital had been forced to overspend on their homelessness budgets by at least £330m in 2024-25.

Local authorities have a legal duty to provide temporary accommodation to anyone who qualifies as homeless - the number of which has risen in recent years.

The government said it was tackling the root causes of homelessness by building homes and abolishing section 21 no fault evictions.

Councils in London said the subsidy they receive for temporary accommodation costs from the government did not compare with the actual financial burden.

In 2023-24, the gap was about £96m, but London Councils estimated the gap for 2024-25 reached £140m – a 45% increase.

The group said if the trend continued, more boroughs would need emergency support from the government and face effective bankruptcy.

The number of homeless Londoners has reached the highest level ever recorded with about 183,000, or one in 50 residents, London Councils said.

Collectively, the boroughs spend £4m daily on temporary accommodation.

Costs have spiked due to fewer rental properties available and an increased use of hotels.

London Councils has called for urgent national policy action in the government's Spending Review to reduce homelessness pressures and to help councils.

The government is set to conclude its review, which will determine levels of investment in public services for the coming years, in June.

It is also preparing a new national strategy on homelessness.

London Councils' executive member for housing and regeneration, Grace Williams, said any potential bankruptcy of local councils could bring "massive uncertainty" to the future of communities' local services.

"It could ultimately mean more costs to the government when emergency interventions are required," she said.

"We need urgent action from ministers," she added.

A spokesman at the Department for Levelling Up, Housing and Communities, 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 £1 billion for crucial homelessness services and tackling the root causes of homelessness by building 1.5 million new homes, boosting social and affordable housing and abolishing section 21 no fault evictions."

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