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Temporary accommodation rise shows the borrowing cap is a false economy

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LGC’s essential daily briefing

Within the past couple of weeks, data coming out of the Department for Communities & Local Government has provided a stark illustration of the housing crisis gripping the country – not that many in the sector needed reminding.

Just under two weeks ago statistics showed councils accepted 59,090 households as statutorily homeless in 2016-17. That was a 2% increase on the previous year.

Between the beginning of January and the end of March this year alone, there was a 1% increase on the previous quarter’s figures. According to the DCLG, the most common reason for this was the ending of the assured shorthold tenancy with a private landlord.

The Conservative manifesto pledged to “halve rough sleeping over the course of the parliament and eliminate it altogether by 2027”.

The full implementation of the Homelessness Reduction Act is intended to play a big part in that. Noble in its intentions, councils have warned that without appropriate funding the legislation could only serve to heap even more pressure on councils’ resources and actually exacerbate the problem rather than alleviate it.

As LGC analysis published today shows, there has already been a boom across the country in the number of households being placed in temporary accommodation in the past year.

In the North West placements increased by 39% within the space of 12 months. In the East Midlands, the number increased by 34% while the West Midlands’ figures rose by 21%.

This is no longer just London’s problem.

Having large numbers of households in temporary accommodation comes at a cost.

While councils are able to recoup some of the cost through benefit payments, if they are forced to pay more than local housing allowance rates that must come from their own budgets. Some local authorities which responded to LGC’s requests for financial information indicated they were struggling to budget for such increases in demand.

Southwark LBC and Manchester City Council respectively saw the second and third biggest increases in the number of households in temporary accommodation last year.

Southwark had a budget shortfall of about £3.6m in 2016-17 – up from about £3.2m the year before. Manchester City Council’s shortfall rocketed from just under £409,000 in 2015-16 to just over £706,000 last year. These shortfalls are on top of the significant sums the councils had set aside beforehand - £3.4m was budgeted in Southwark’s case last year, and £1.6m in Manchester.

That is to say nothing of the human cost of families forced to live in uncertain and precarious circumstances with all the disruptions to work and education that can entail.

A main driving force behind the sharp increases in temporary accommodation placements is in part due to people being unable to afford rising rents in the private sector and more households staying longer in the temporary homes they are allocated.

The reason for that is simple: there is a shortage of suitable homes that are affordable for people to live in.

Some councils are champing at the bit to build more homes but are unable to do so due to caps on their housing revenue accounts.

That has led a trio of councils to enter into discussions with the government over bespoke housing deals which could include a relaxation on their borrowing limits. One of the officers involved in the discussions, Stoke-on-Trent City Council’s director of housing and customer services Carl Brazier told last week’s Housing 2017 conference he is a “great believer” in councils being the “provider of lots of homes”.

He said: “That doesn’t mean it has to be just us [local authorities] but we have to change that landscape and give councils more flexibilities to deliver.”

The government has resisted such calls so far, but as Terrie Alafat, chief executive of the Chartered Institute of Housing, warned last week, not investing in affordable housing “will come at a very severe cost for the government, our health and social services and for society”.

As the temporary accommodation demonstrates, the borrowing cap is a false economy.

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