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EXCLUSIVE: Rising costs and subsidy shortfall hit councils with massive bills

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Councils are being forced to spend millions of pounds of their own money on temporary accommodation for homeless residents due to rising housing costs and welfare reform, an LGC investigation has found.

Figures from a sample of councils with the largest increases in people in temporary accommodation in recent years show a steep increase in the amount councils pay out but cannot reclaim from the Department for Work & ­Pensions through benefits payments.

In total, the nine councils surveyed used £18.8m of their own cash in 2014-15, up from £8.6m in 2012-13, a rise of 120%.

Rising private sector rents and welfare reform were blamed for the huge increases.

Waltham Forest and Hackney LBCs saw the largest percentage increases in the size of the bills for temporary accommodation, at 874% and 239% respectively. In 2014-15 Waltham Forest spent £2.2m while Hackney spent £3.4m. Outside the capital, Bristol City Council saw the largest percentage increase at 23%, leaving it to foot a bill of £1.5m.

All three blamed the buoyancy of their local housing markets for pushing up private sector rents, causing more people to become homeless and increasing the cost of temporary accommodation.

The amount councils can claim back from the DWP as subsidy for temporary accommodation costs is based on the 2011 level of the local housing allowance and capped at £500 a week in London and £375 outside.

This is creating a widening gulf between the amount councils pay and can claim back for temporary accommodation. In our sample, the proportion of temporary accommodation cost covered by housing benefits fell from 85% in 2012-13 to 78% in 2014-15.

LGC’s research examined the impact of this ­policy change in areas which had seen the biggest increases in use of temporary accommodation. We asked the 20 authorities with biggest absolute increases between 2013-14 and 2014-15 and the 20 authorities with the biggest percentage increases to provide data on their spend on temporary accommodation over the past three years.

The research found a sharp increase in overall expenditure on temporary accommodation, including the DWP spend.

The 11 authorities that provided figures for their gross expenditure, before reimbursements, spent £169.5m on temporary accommodation, 55% more than in 2012-13.

Southwark LBC’s gross expenditure on temporary accommodation almost doubled in that period from just over £6m to more than £12m.

Richard Livingstone (Lab), cabinet member for housing, blamed the “cumulative impact of various welfare changes” and increases in private rents for the rise in people needing temporary accommodation.

“I’m genuinely concerned that with more budget cuts expected this year, councils like Southwark are going to really struggle to find housing for some very vulnerable people. It’s not just the cost, but also the availability of suitable properties that is a real challenge for us,” he said.

Some authorities said they were seeing more working families becoming homeless and unable to afford private sector rents. Many councils reported increases in private sector tenants who had been evicted. People who had lost a private sector tenancy made up half of homeless people accepted by Waltham Forest and Bromley LBCs.

In Enfield LBC, 80% of people accepted as homeless in 2014-15 had been evicted from a private tenancy, up from 34.3% in 2011-12. The council also said local people were being displaced as a result of inner London boroughs housing some of their homeless people in Enfield.

Some councils reported landlords were raising the price of temporary accommodation in response to demand. Bromley, Ealing and Enfield all reported that more operators wanted to charge by the night, which is more expensive than longer leases.

A Department for Communities & Local Government spokesman said since 2010 the government had invested more than £500m in tackling homelessness. “The number of households in temporary accommodation is well below the peak reached in 2004.”

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