London Councils has warned that the capital’s homelessness crisis is pushing local authorities to the brink, with boroughs overspending by at least £330 million on homelessness this year.
The cross-party group, which represents all London boroughs, says the crisis now represents the single biggest risk to council finances. The number of people in temporary accommodation has reached 183,000 – the highest figure ever recorded – meaning one in every 50 Londoners is without a permanent home.
Councils had originally budgeted nearly £600 million for homelessness in 2024-25. But rising numbers of people needing support, along with soaring temporary housing costs, have pushed that figure up by 60%.
Cllr Grace Williams, London Councils’ Executive Member for Housing & Regeneration, said:
“The worsening homelessness emergency is devastating the lives of too many Londoners and represents the single biggest risk to boroughs’ finances.
“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.
“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.”
Temporary accommodation now costs boroughs £4 million a day. Many councils have lost access to cheaper rental properties due to landlords pulling out, forcing them to rely more heavily on expensive hotel stays and nightly rates.
The gap between what councils spend on temporary accommodation and what they can claim back from government – known as the subsidy gap – is also growing. It stood at £96 million last year and is expected to rise to £140 million in 2024-25.
London Councils is urging the government to act in its upcoming Spending Review. The group is calling for more funding, a new national homelessness strategy, and permanent changes to housing benefit and Local Housing Allowance rates to reflect the rising cost of rent.
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