Councils warn London’s funding ‘raw deal’ undermines homelessness push

  • By JackGraves

A growing homelessness crisis and inadequate funding are costing London boroughs more than £200 million every year – with councils warning the worsening situation risks undermining the government’s national push on reducing homelessness.   

New research carried out by LSE London on behalf of London Councils, the capital’s cross-party representative body for local government, 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.

London boroughs support the aims of the Homelessness Reduction Act, which was designed to improve help for those at risk of homelessness, ensure earlier interventions, and expand support (to include, for example, single people – who historically have received less assistance). The government’s expectation was that homelessness rates would fall and local authorities’ costs reduce.

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).
  • 55,000 London households (families and single people needing help) required support from homelessness services in 2018/19. This compares to an average of under 30,000 households per year in the previous decade (2008 to 2017).
  • The number of London homelessness cases over the first five years of the Homelessness Reduction Act may have been underestimated by around 50% – with severe implications for boroughs’ services. The government’s assumption that the Act would be cost-neutral by 2020/21 is highly unlikely to materialise and not suggested by trends since the Act was introduced.
  • 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.
  • In the five years following the 2018 introduction of the Homelessness Reduction Act, boroughs will have to find an extra £70 million as a result of increasing homelessness and service costs.

London Councils is calling on the government to increase investment in homelessness services to reduce pressure on boroughs’ general funds and to ensure the potential benefits of the Homelessness Reduction Act can still be achieved.

Although the spending round announced in September 2019 boosted homelessness funding, this has not been enough to cover fast-rising costs in London and boroughs have not been told how the additional money will be used. Borough services are under significant strain – making it harder for councils to cope with the growing numbers of homelessness cases and to carry out effective prevention work.

Pressing for recognition of London’s homelessness costs represents one of London Councils’ Pledges to Londoners – a series of pan-London, cross-party priorities agreed earlier this year. London boroughs are determined to work together with the government to tackle homelessness and to secure improved funding for addressing the issue.

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. It’s unsustainable to leave London boroughs covering more than £200 million of costs from our general funds when our core funding has been reduced by 63% since 2010.

“While we welcome the recent increase in homelessness funding set out in the government’s spending round, it does not come close to reflecting the true cost of addressing homelessness. 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.

“London’s extreme housing pressures mean the capital’s local authorities face the highest number of homeless households requiring help and the highest costs in securing accommodation for them. It can take months or even years to find them settled homes. The government’s funding calculations didn’t reflect the situation in London, meaning that from next April boroughs will have to use their own general funds to pay for all the additional activity brought about by the Homelessness Reduction Act.”

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

“We are committed to supporting Londoners facing homelessness. 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.

“For councils to make a success of the Homelessness Reduction Act and reduce costs in the longer term, we need an immediate boost to our resources and greater certainty around future funding.” 




  1. The Cost of Homelessness Services in London was commissioned from LSE London by London Councils and the London Housing Directors’ Group. The research investigated the costs of delivering homelessness services in London in a post-Homelessness Reduction Act landscape.


  1. The government’s consultation on the implementation and impact of the Homelessness Reduction Act closes on Tuesday 15 October 2019:


  1. The government’s spending round in September 2019 announced an additional £54 million for tackling homelessness and rough sleeping across the country. While details about the allocations are yet to be confirmed, the extra funds are not tied to Homelessness Reduction Act burdens and clearly won’t be enough to cover London’s costs.