Councils’ Spending on Temporary Accommodation Soars to £2.8bn

Key Data

• Councils spent £2.8bn on temporary accommodation in 2024–25, a 25% increase on the previous year.

• Spending has more than doubled in the past five years, driven by a shortage of affordable housing and rising private rents.

• Around one-third of this spend went on B&Bs and hostels, which are costly and often unsuitable for families.

What This Means for Landlords

1. Increased Demand for Private Rentals from Councils

• Councils are relying heavily on the private sector to house families in crisis, often on short-term contracts at above-average rates.

• Landlords with vacant stock, HMOs, or properties adaptable for temporary accommodation could find new income streams through council agreements.

2. Pressure on Reimbursement Rates

• Councils are reimbursed by central government at 2011 rent levels, while landlords must be paid at 2025 market rates.

• This gap leaves councils under pressure to negotiate harder with landlords or limit the number of contracts.

• Landlords may face payment delays or councils seeking “value-for-money” reviews.

3. Regulatory and Political Scrutiny

• Shelter and other housing charities have criticised private providers for “cashing in” on the crisis.

• Calls are growing for the government to regulate nightly rates or impose stricter property standards on temporary housing.

• Landlords providing emergency accommodation should expect increased inspections and compliance requirements.

4. Opportunities vs. Risks

• Opportunities:

  • Premium rents for short-term lets to councils.

  • Steady demand from local authorities amid chronic housing shortages.

  • Diversification away from traditional AST tenants.

• Risks:

  • Political pushback leading to rate caps or tighter regulation.

  • Cash flow risks if councils delay payments.

  • Reputation concerns if properties are perceived as substandard.

  • Possible withdrawal of government funding if reimbursement rules are not updated.

Policy Outlook

• The Local Government Association is lobbying for reimbursement rates to be updated to current levels and for LHA rates to be restored to at least the 30th percentile of local rents.

• Shelter is pressing the government to commit to 90,000 new social rent homes per year, which would reduce reliance on the private sector in the long term.

• If implemented, these changes could lower councils’ dependence on private landlords over the next decade.

Strategic Considerations for Landlords

1. Engagement: Open discussions with local councils can clarify contract terms, payment timelines, and compliance expectations.

2. Portfolio Strategy: Properties suitable for temporary lets may generate reliable income in the short term, but landlords should weigh this against longer-term reputational and regulatory risks.

3. Diversification: Landlords heavily dependent on council contracts may wish to balance this with private rentals to hedge against future policy shifts.

4. Compliance: Maintaining high standards of safety and habitability is essential to mitigate reputational risks and prepare for likely tightened oversight.

Bottom Line:
The surge in council spending on temporary accommodation underscores the growing reliance on private landlords to fill the housing gap. For landlords, this presents a short-term opportunity but a long-term uncertainty. Engagement with councils may secure attractive rents now, but policy reforms and the push for more social housing could reshape the landscape in the coming years.