New data published this week show London’s homelessness crisis continues to escalate, with boroughs now spending £5.5 million a day on homelessness in 2024-25 – up from £4.2 million a day in 2023-24.
The bulk of that spending is the cost of providing temporary accommodation for homeless families – now almost £5m a day in the capital. Net current expenditure on homelessness in London has risen by 42% since last year, compared to a 16% increase across the rest of England.
London Councils argues this shows the government must use the latest available data and evidence as they take key decisions over council funding reforms in the coming months.
As part of the Fair Funding Review 2.0 reforms, the government is simplifying how it measures relative needs across the country. While London Councils has welcomed the proposed introduction of a new formula to reflect levels of spending on Temporary Accommodation, the cross-party group is concerned that using 2023-24 spending data would significantly undercount the scale of the pressures facing boroughs and other parts of the country.
London boroughs are also calling for the government to update the Index of Multiple Deprivation (IMD) to reflect the cost of housing and increase the weighting given to factors such as homelessness and housing affordability, in light of the escalating crisis. Currently, homelessness is given equal weighting to ‘road distance to a post office’ in the IMD, suggesting these factors have a similar impact on people’s life chances.
Ahead of the conclusion of government’s funding review, boroughs are also calling for changes to the proposed children’s formula – a new, untested model that significantly underestimates the level of need in the capital and would lead to a dramatic reduction in London’s share of funding. London Councils is seeking several changes to the children’s formula:
- Using measures of SEND, rather than relying on parental opinions of a child’s health, which are subjective and only captured every ten years through the census.
- Fixing incorrect assumptions in the formula – the current model suggests that children in overcrowded housing are less likely to be in care, despite extensive evidence from across the sector showing this to be incorrect.
- Including updated deprivation measures to properly reflect children’s needs – the existing Free School Meals eligibility criteria fails to reflect housing costs.
Overall, London Councils estimates the reforms could leave London boroughs collectively worse off by more than £700 million over the next three years compared to using the current formula, with a growing number of boroughs likely to require Exceptional Financial Support (EFS) from government to balance budgets as a result.
Cllr Claire Holland, Chair of London Councils, said, “London boroughs are now spending a staggering £5 million a day on temporary accommodation – a stark reflection of the scale of the capital’s housing crisis, which continues to worsen.
“This underlines the importance of using the most up-to-date data in the forthcoming reforms to local government finances and ensuring measures of deprivation properly reflect housing costs and the impact of homelessness.
“After more than a decade of structural underfunding, rising costs and growing demand, it is vital that boroughs receive funding which genuinely reflects the level of need in the capital. We want to work with the government to address our concerns with the Fair Funding Review so that we can help restore stability to council finances and prevent more boroughs being plunged into crisis.”
London Councils continues to make the case for a fairer funding system that recognises the high levels of deprivation and high cost of delivering services in the capital and enables boroughs to protect services and maintain financial sustainability.
With a forecasted collective funding gap of at least £500 million this financial year, boroughs are raising the alarm that, without meaningful reform, more councils may be forced to consider emergency financial measures. Almost one quarter of boroughs currently rely on EFS from government.
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