The cost of living crisis is hurting frontline homelessness services

When Homeless Link launched our Keep Our Doors Open campaign, it was in direct response to the concerns our member organisations were raising. Homelessness services were already affected by chronic underfunding, and the sharp rise in inflation hit hard.

With margins already tight, there was a fear that sudden cost increases would push some services over the edge of the cliff they had been teetering on for many years, leaving people facing homelessness without safe and trusted providers to turn to and forcing those already housed by charities to return to the streets.

However, homelessness services and the people who work within them are resilient and resourceful, their passion for ending homelessness and dedication of their staff allowing them to achieve amazing results on the tightest of budgets. But, over a year since inflation first drastically jumped and with figures showing a 26% rise in rough sleeping in 2022, what situation are providers in now?  

Having spent the last few weeks talking to homelessness organisations across the country, it’s clear that, while a handful of services have benefitted from uplifts to commissioned contracts, many are now facing significant deficits and the tough decisions that follow them. 

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These problems aren’t new. While inflation has made the situation for services more extreme, the groundwork was laid by years of chronic underfunding. Many services report their contract values have remained frozen for as long as 10 to 15 years. As one provider currently trying to manage a large shortfall on a contract told me: “We’re still being paid at 2010 levels to do a completely different thing.” Another said: “We’re seeing real-terms decreases year after year, there will come a point when our services simply aren’t safe to run anymore.”  

Unsurprisingly, the need to boost staff wages in the face of inflation has been one of the most significant costs to homelessness services. Even before inflation spiralled, Homeless Link’s 2022 workforce survey found that just 28% of people within the homelessness sector thought frontline staff were appropriately paid, while 61% agreed that it was hard to find high-quality staff.

Despite most services giving staff the maximum pay increases they could afford, these issues have intensified in the past year, with some reporting having around a quarter of positions vacant at any one time. As one provider told me: “At one stage, we were hearing examples of our own staff not being able to heat their home or skipping meals.” These conditions are leading to staff leaving the sector, in turn placing further pressure on depleted teams to meet rising demand.

Another pressure services have faced is rising energy bills, particularly those whose energy contracts came to an end around the time inflation started rising. One national provider is facing an increase from around £240k in 2022 to an estimated £530,000 for the current year. Their CEO said: “Ultimately these increased costs will affect what we as an organisation can deliver, as no organisation can work at submarket costs and run contracts continuously at a deficit.”

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Overall, case study data we have collected at Homeless Link shows average energy costs for service providers will be up 141% this year when compared to 2021. It’s therefore no surprise services are reporting that if these cost pressures continue, they will have to reduce their service capacity significantly. Meanwhile, some councils, such as in Devon, are now considering the dangerous and short-sighted decision to de-commission some homelessness services to cut costs.  

It must be noted that the government did recognise the tough situation charity providers are facing in the recent Spring Budget. The chancellor Jeremy Hunt announced £100m of new funding for third sector service providers “targeted at those frontline charities and community organisations most impacted by increased demand for their services from vulnerable people and increased delivery costs.” While this funding is welcome, it’s a drop in the ocean when compared to the level of need across the charity sector, with one CEO of a major homelessness charity telling me “it’s nowhere near enough for a national figure”. 

In the long-term, it’s clear that the homelessness system and the way it is funded needs a major overhaul. Homeless Link’s latest Annual Review of Support for Single Homeless People found that the number of bed spaces within the sector declined by 26% between 2010 and 2021, with cost of living pressures likely to force the sector to contract even further. At the same time, rough sleeping has risen significantly. 

The looming general election, likely to come in the second half of 2024, provides the perfect opportunity for all major political parties to commit to a new system that doesn’t leave services extremely vulnerable to an ever-changing economic climate, giving them the stability to go beyond just providing a bed for the night and embed the kind of holistic, person-centred support that we know is most effective in helping people leave homelessness behind for good.   

As one homelessness CEO told me: “Any help just tries to repair the puncture, when, in reality, we need a brand new tyre.”

Nye Jones is the campaigns manager at Homeless Link, the national membership charity for organisations working directly with people who become homeless in England

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