Published: 16 Mar 2017 by Heather Spurr

Marcus Jones, the homelessness minister, has confirmed a change in council funding to encourage local authorities to spend money on stopping homelessness instead of on costly temporary accommodation. But local authorities will be left with few tools to prevent people becoming homeless without an end to the Local Housing Allowance freeze.

In keeping with its focus on prevention, the government wants councils to spend money currently spent on expensive temporary accommodation on stopping people becoming homeless in the first place. In order to do this, it has confirmed a technical change to how councils are funded to manage temporary accommodation for homeless people.

What is the issue?

Local authorities are obliged to provide temporary accommodation for families that are homeless through no fault of their own. Because of the shortage of social housing, most temporary accommodation is procured from private providers. The accommodation is funded through a combination of housing benefit (which is called “Local Housing Allowance” or “LHA” in the private rented sector), plus a management fee for each homeless household in temporary accommodation.

In 2015, the government said it would abolish this management fee and replace it with a lump sum for local authorities to tackle homelessness in more creative ways. Yesterday, the government announced how much each council would get of the new “flexible homelessness support grant”, which is worth £402m for the first two years.

Will this approach work?

The advantage of the lump sum is that local authorities can use the funding for things other than managing accommodation – such as hiring new staff to prevent people losing their home in the first place.

The government has also included a welcome boost in funding in the first year for local authorities with very high levels of households living in temporary accommodation.

Combined with the expected new duties on local authorities to prevent and relieve homelessness in the Homelessness Reduction Bill, councils are now encouraged to do far more to prevent people falling into homelessness and have the flexible funding that should allow them to do so.

The question is whether councils will manage to do this.

In high pressure areas, high rents, increasing levels of homeless, and cuts to benefits have caused a crisis in temporary accommodation, which is rapidly proving difficult to control.

There are 74,630 families living in temporary accommodation, up 55% since 2010. These families are frequently trapped for years in this unstable, often overcrowded, accommodation because of a shortage of genuinely affordable homes and squeezed benefit levels.

This month, the Local Government Association warned ahead of the Budget that councils were spending £2m a day on temporary accommodation.

And it’s unclear whether the government’s distinction between core costs and management costs will mean much in practice. An interesting report by researcher Julie Rugg last year found that London councils were generally unable to disaggregate the management element from the rest of the temporary accommodation subsidy.

Officers reported that the fee was largely absorbed by the shortfall between the rent charged by the landlords of temporary accommodation and the LHA level.

Clearly something more radical has to happen, beyond a technical funding change to the way temporary accommodation is managed. While increased funding is obviously welcome, it will not increase the supply of new homes and will not fix the problem of benefit rates failing to keep up with private rents.

What should the government do?

The government is on the right lines to say that we should stop people becoming homeless in the first place. But at the same time, ministers have frozen LHA rates at 2016 levels for four years.

Our research shows that in a quarter of the country, a family with one or two children would now face a £100 or more a month shortfall between the LHA level and a two-bedroom home at the cheapest end of the market.

The growing gap between LHA rates and high rents means that more and more families are now left with no choice but to fall onto council homelessness services.

In order to truly prevent homelessness, councils have to be able to find housing that low-income families are truly able to afford. In the long-term, building more genuinely affordable homes will help fix this problem.

But many councils are facing a crisis in temporary accommodation that demands an immediate fix.

The government must end the damaging freeze on LHA so that benefit levels begin to reflect rents once more.

The government has suggested that councils hire new homelessness prevention officers with the new funding. But if something fundamental does not change, these new staff may find that their first job is to tell families that they have nowhere to house them.