The cumulative cost to councils in England of the temporary accommodation subsidy gap could reach £3 billion by the end of the decade, according to new LGA analysis.
The findings, released ahead of the Autumn Budget, highlight the growing strain caused by temporary accommodation and how the subsidy funding gap – the difference between what councils pay out in housing benefit for households in temporary accommodation and what they are reimbursed by the Department for Work and Pensions – compounds this.
Although households receive their full housing benefit entitlement, the amount councils can reclaim has been capped at 90 per cent of 2011 local housing allowance (LHA) rates for more than a decade.
With demand for temporary accommodation rising sharply, and rents increasing far above 2011 levels, councils are covering an ever-greater share of the bill themselves.
The LGA’s analysis shows the annual gap is set to rise by almost 50 per cent in the next five years, from around £270 million to nearly £400 million, without government action. In 2023/24, councils spent £1.05 billion on housing benefit for temporary accommodation, but received only £780 million back, leaving a £266 million shortfall.
Councils spent £2.8 billion on temporary accommodation in 2024/25, suggesting the subsidy gap will be even wider once full data is published.
The LGA says uprating the reimbursement rate to 90 per cent of today’s LHA levels would reduce the projected cumulative cost to councils by £700 million by 2029/30.