Housing

Councils need millions to prevent bankruptcy due to rising cost of homelessness: 'It's a national crisis'

Both Eastbourne and Medway Councils have asked the government to help them balance the books this week and, for the first time ever, it’s chiefly down to the ‘national crisis’ of temporary accommodation

Eastbourne pier homelessness

Storm clouds are gathering beyond Eastbourne's iconic pier as the cost of supporting people who are homeless pushes the council to the financial brink. Image: Lee Roberts / Flickr

Two English councils have pleaded with the UK government for millions of pounds to cover the escalating “national crisis” of the cost of homelessness.

Both Eastbourne and Medway councils have asked the government for exceptional financial support, warning they could face bankruptcy without an intervention as record numbers of people are forced into temporary accommodation.

At a council meeting on Wednesday (7 February) night, Eastbourne Borough Council members said they had asked the government for £3m a year for this year and next after revealing 49p from every £1 of their existing budget was being spent on temporary accommodation. The government has already rejected proposals to raise council tax to 7.99%.

The Liberal Democrat-led local authority first sounded the alarm last November when it hosted more than 100 councils in Eastbourne for an emergency District Councils Network summit.

But now councillors are unable to set a budget for next year and Eastbourne Borough Council leader Stephen Holt said at last week’s meeting that he “hoped the government is listening.”

“We are all saying with one unified voice that, whatever your political persuasion, this situation cannot go on any longer,” said Holt.

“There is a national crisis that is very much threatening the safety net that councils provide.”

Last week MPs from the Levelling Up, Housing and Communities Committee urged ministers to address systemic underfunding in local government and tackle the £4bn gap in council finances nationally.

A government spokesperson told The Big Issue they are “ready to talk” to authorities struggling to balance the books and last week announced a £64.7bn funding package for local government in 2024-25. Ministers insist that it is an increase of 7.5% in cash terms.

Councils budgets have been under pressure off the back of cuts, the cost of living crisis and greater demand for social care services and homelessness, including the additional need to support people granted asylum who have been forced out of Home Office accommodation.

The ongoing housing crisis has seen low-income families priced out of the private rented sector and a growing need for temporary accommodation with a record 105,750 households living in non-permanent homes across England.

The failure to build enough social housing and the loss of council housing stock to the private sector through Right to Buy has made the shortage of affordable housing even worse.

New government figures released this week showed 16,000 social homes were lost last year – a situation Crisis chief executive Matt Downie described as “disgraceful”.

It’s under this backdrop that councils are forced to turn to costly temporary accommodation and its eroding already hammered budgets.

Collectively English councils spend £1.7bn a year on temporary accommodation and that’s set to skyrocket.

Eastbourne councillors estimate the authority will be spending £5m this year on B&Bs, hotels and other makeshift homes, up from £1.4m in 2018-19.

The Big Issue heard that the situation is having a big impact on frontline charities and groups supporting people experiencing homelessness.

Dan Saxby, the Eastbourne advice manager for BHT Sussex, a housing association and homelessness charity, said rising rents and landlords exiting the private rented sector had left people with nowhere to go.

“We provide housing advice under legal aid and we’ve never been so busy,” said Saxby.

“Our February appointments are all booked up and this is the same across our three offices in Sussex. This means that we can’t respond to people with urgent homelessness issues.

“I have an understanding and sympathy for the situation local authorities find themselves in. We represent clients so we will challenge decisions made by local authorities where relevant but on their wider homelessness duties they’re in an impossible situation because of demand versus funding. The people that end up impacted are the people who are homeless.”

Roland Brown, chief executive of the Kingdom Way Trust provides single-room emergency accommodation for rough sleepers in Eastbourne, said greater efforts to secure affordable housing and support for people who have experienced homelessness are needed.

From the positive of Everyone In during Covid when street numbers went right down, numbers have just spiralled in the last three or six months to a year where it feels, to be honest, like we’re fighting a losing battle,” said Brown.

“Literally in the last two months I’ve managed to get 10 more rooms available and we’ve filled them before we’ve even got the keys to the door.”

Trudy Hampton, who runs local charity Warming Up The Homeless (WUTH), told the Big Issue that she is pleased the council is taking proactive action in Eastbourne.

Like elsewhere, Eastbourne is stuck in a “vicious circle” of a cost of living crisis and housing crisis, she said.

Frontline charities like WUTH are seeing the effects first-hand – between April 2022 and April 2023 demand for their services skyrocketed by 250% and they now see 1,400 clients a week. 

“It’s a positive move because they will recognise there was an issue because in previous years they haven’t done that,” said Hampton.

“It’s forcing their hand in a way to make provisions for those that are going to be homeless because this just isn’t going to stop.

“We’re the front edge of homelessness, the front line, where we are the people that see those that come off the streets and say help. And then there’s nothing we can do because if there’s no housing, these people need somewhere to live

“The government needs to look at the statistics by those on the frontline and make a long-term plan on how England is going to get out of this housing crisis because it’s not going to go away.”

Eastbourne may be the most vocal council on the issue, but scores of other councils are feeling the strain too.

Medway Council revealed last week it has also asked the government for support. A report from the Chartered Institute of Public Finance and Accountancy (CIPFA) found the unitary council representing 280,000 residents was in “a grave situation in relation to its financial sustainability”.

Councillors are awaiting a decision from central government for exceptional financial support to the tune of £14.6m in 2024-25 and a further £16.2m in 2025-26 in a bid to plug a £35.8 m budget blackhole.

The council has also been denied a request to hike up council tax and is introducing parking charges at country parks and scrapping free swimming programmes for youngsters and pensioners to avoid following other councils into insolvency.

Vince Maple, Medway Council leader, said: “Medway is not alone in its financial position, with the Local Government Association reporting that one in five councils could be in severe financial hardship in two years. It is absolutely critical that we act now to bring the council back into long-term financial health. 

“If the government supports our request for borrowing and if this important decision is agreed through the Cabinet and Full Council processes, as well as putting in place the improvement plan outlined by CIPFA, it will help us head in the right direction towards becoming financially sustainable.” 

London Councils sounded a warning too as ministers debated the local government finance settlement in the Commons last week.

The cross-party group said they face a funding shortfall of £400m – the same amount London’s 33 authorities collectively spend on homelessness in a single year.

Rising demand for homelessness services is among councils’ biggest budgetary concerns as they look to stave off bankruptcy through a Section 114 notice. 

Boroughs want chancellor Jeremy Hunt to continue the household support fund beyond its planned axing next month and increased housing and homelessness fund among his Spring Budget announcements on 6 March.

Councillor Claire Holland, deputy chair of London Councils, said: “The increase in funding set out in the government’s finance settlement will not be enough to address the enormous funding gap we are grappling with. Massive pressures on local services, skyrocketing costs, and years of inadequate funding have left town hall finances teetering on a cliff edge.

“It is in no one’s interests for a council to find itself in a Section 114 situation. Londoners want stability for their local services. We will continue to urge ministers to increase funding support and to work with us in making the local government finance system fairer and more sustainable.”

A government spokesperson said councils had recently been awarded an additional £600m support package.

They added: “Councils are ultimately responsible for their own budgets but we stand ready to speak to any council that has concerns or is facing financial pressure.”

At last week’s Commons debate on council funding, Labour’s Jim McMahon accused the government of “perpetuating the homelessness crisis”.

He said: “The government’s reckless approach is undermining the fundamentals of local public services.”

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