The gap between the amount of money councils are paying in housing benefit and the amount they are reimbursed from the Department of Work and Pensions increased to £260 million, new LGA analysis has found.
The gap between the amount of money councils are paying in housing benefit and the amount they are reimbursed from the Department of Work and Pensions (DWP) increased to £260 million, new analysis by the Local Government Association has found.
This means that the amount of money that councils are losing grew by a third (30 per cent) in just a year, adding further pressure to already stretched budgets and diverting money away from services to prevent homelessness. This challenge risks being exacerbated by the reduction of the Move On period back to 28 days for single adults and we ask the Government to work with us on resolving this issue.
There are 131,140 homeless households living in temporary accommodation where housing costs can be covered by claiming housing benefit. Councils pay the cost of that housing benefit upfront and are paid back by the DWP.
While households receive the full housing benefit they are entitled to, the amount councils can claim back is currently capped to 90 per cent of Local Housing Allowance (LHA) rates from back in 2011.
This means councils are not able to claim back costs that reflect what they are spending, and it is increasingly getting worse as the demand rises under a higher LHA rate.
Latest figures show that in 2023/24 the total spend for councils in England was £1.04 billion, while the DWP only reimbursed £780 million to councils which has left a £260 million gap.
This has increased by 30 per cent from the previous year, and over the last six years the total gap cost to councils is £1 billion.
The LGA is calling for the rate of reimbursement to be lifted from the 90 per cent of the 2011 LHA rate to 90 per cent of the current LHA rate.
Had the rate of reimbursement been lifted from the 90 per cent of the 2011 LHA rate to 90 per cent of the current LHA rate, a long-term LGA ask, councils would have had £941 million reimbursed rather than £780 million.
This would ultimately help reduce the pressures on council finances and support preventing homelessness.
Cllr Tom Hunt, Chair of the LGA’s Inclusive Growth Committee, said:
“Councils are caught in a vicious cycle of ever-increasing temporary accommodation costs versus static rates they receive back to cover their costs.
“Current housing benefit reimbursement rules for temporary accommodation are outdated – councils must pay landlords according to current market rates, whilst reimbursement for councils is linked to 2011 rental rates.
“This is effectively penalising councils for supporting families in temporary accommodation – a challenge which has seen an upward trajectory.
“This needs to change and government needs to act, specifically by making the rate the current rate, as opposed to one that’s 15 years old.”
Notes to editors
The analysis was drawn from the DWP data on Housing Benefit and Council tax expenditure by local authority here' with this link https://www.gov.uk/government/publications/benefit-expenditure-and-caseload-tables-2024
The demand for temporary accommodation has been increasing drastically and recent figures show 131,140 households were in temporary accommodation, which is an increase of 11.8 per cent from 31 March 2024.
Households with children in temporary accommodation increased by 11.6 per cent to 83,150, whilst single households increased by 12 per cent to 47,990 since 31 March 20241.
How the Temporary Accommodation reimbursement process works;
Step 1: Individuals/families who are in immediate need of temporary housing are directed to contact their local authority. It is at this point that the local authorities are legally required to assess the needs of their residents and determine whether they are eligible for temporary accommodation.
Step 2: If the individuals/families meet the conditions for assistance, they are placed into available temporary accommodation. These may be hostels, temporary flats owned by private landlords, councils, or housing associations, or even B&Bs and hotels.
Step 3: Generally, the local authority covers the upfront cost of the temporary accommodation and is subsequently reimbursed through direct payment from the individual’s benefits (when applicable), Discretionary Housing Payments (DHPs), and homelessness prevention grants from the central government. DWP is responsible for administering the reimbursement process. Additionally, the local authority has a duty to provide ongoing support to its residents, including helping individuals in temporary housing find permanent housing and providing resources to help resolve the root causes of homelessness.
The amount of TA reimbursement is calculated based on Local Housing Allowance (LHA) rates specific to the Broad Rental Market Area (BRMA) where the accommodation is located. The rates are based on January 2011 LHA rates and vary by the type and size of the property. Applicable LHA rates range from the one-bedroom rate to the five-bedroom rate.
Non-Self-Contained Accommodation (Board and Lodging or Licensed): The subsidy is limited to the one-bedroom self-contained LHA rate for the property’s location, and even if more than one room is occupied by the same household, no extra subsidy can be claimed.
Self-Contained Licensed and Short-Term Lease Accommodation: The maximum subsidy is 90 per cent of the LHA rate for the size of the property.
Furthermore, the subsidy cannot exceed the weekly Housing Benefit entitlement, or the upper cap limit (£500 per week for accommodation within 6 London (Central London, Inner West London, Inner North London, Inner South West London, Inner East London, Inner South East London, Outer South West London) and £375 for all other BRMAs).
Currently the Asylum Seekers move on period has been uprated to the standard 56 days in line with the Homelessness Reduction Act 2017, however it has been reduced down to 28 days for single adult asylum seekers.
The Move On period for single adult Asylum Seekers has recently changed to 28 days, remaining at 56 days for families and older people in line with the Homelessness Reduction Act 2017. The move on period has been linked to rising demand and costs for housing and homelessness services locally as people leaving Home Office accommodation may need Councils’ advice to find housing to move to.