The Cost of Homelessness Services in London

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Research carried out by LSE London on behalf of London Councils and the London Housing Directors’ Group shows that the implementation of the Homelessness Reduction Act in April 2018 has substantially increased the number of people seeking help from boroughs and the resources required for services.

The Cost of Homelessness Services in London report reveals:

  • Due to the chronic lack of affordable housing and record number of homeless households, the homelessness costs burden falls disproportionately on London.
  • The cost of handling a homelessness case in London is at least double the cost for England as a whole (mostly due to the higher costs of securing accommodation for a homeless household in the capital)
  • The cost of preventing a homelessness case (i.e. either helping a household to stay in their current accommodation or find a new place to live prior to becoming homeless) in London is almost four times the England average. The ‘new burdens’ grant funding to support implementation of the Homelessness Reduction Act did not take into account London’s higher costs and is due to end after March 2020. 
  • The capital’s local authorities spent over £919 million on homelessness services in 2017/18. £201 million of this expenditure was not covered by central government grants or councils’ housing income (such as rental payments), meaning boroughs resorted to covering the costs from their general funds (which could be used for other council services).
  • If current trends continue, the total cost of London’s homelessness services will increase to over £1 billion a year by 2021/22. If funding arrangements do not change, the cost to boroughs’ general funds is estimated to rise to £237 million by 2022/23 – representing an increasing proportion of boroughs’ total homelessness spending.


Cllr Darren Rodwell, London Councils’ Executive Member for Housing & Planning, said:

“Even though London faces the most severe homelessness crisis in the country, the capital gets a raw deal when it comes to funding.

“London boroughs are committed to tackling homelessness and making a success of the Homelessness Reduction Act, but this crucial work can’t be done on the cheap. The government must make sure London’s hard-pressed homelessness services have the resources they need.”


Kath Scanlon, Distinguished Policy Fellow at LSE London, said:

“If the goals of the Homelessness Reduction Act are achieved, the wellbeing of many thousands of people will be improved. But our research shows that the government underestimated the financial impact of the Homelessness Reduction Act on the capital.”


Jackie Odunoye, Co-Chair of the London Housing Directors’ Group, said: 

“The Homeless Reduction Act’s focus on preventing homelessness is undoubtedly sensible but since it was introduced we’ve seen a significant increase in homeless cases across the capital.

“Our ability to prevent homelessness is undermined by London’s severe shortage of affordable housing options. We’re also hugely concerned by the uncertainty over future funding when new burdens funding ends in March next year, particularly given the additional administrative burden which takes staff time and other resources away from frontline prevention work.”