Local authorities encounter a significant £76million shortfall in funding, according to recently published data.
In response to the increasing demand for homelessness services among English councils, the current UK government has announced significant new funding and strategic commitments as part of its 2025/26 budget and recent spending reviews.
The government's approach is multifaceted, aiming to address both the immediate pressures on councils and the systemic causes of homelessness in England.
One key response is the increase in the Homelessness Prevention Grant (HPG) by £192.9 million for 2025/26. A ringfence requires that 49% of this funding be spent specifically on prevention, relief, and related services to tackle homelessness early on.
The overall homelessness budget remains protected at around £1 billion per year, covering key programs including the Homelessness Prevention Grant, Rough Sleeping Prevention and Recovery Grant, and Rough Sleeping Accommodation Programme. While no inflationary uplift details are confirmed yet, maintaining this budget is viewed as a positive step in the face of wider public spending cuts.
Recognising the crisis in temporary accommodation, the government has allocated £950 million through the Local Authority Housing Fund to support temporary accommodation costs and remediation. This fund aims to improve the quality of temporary accommodation while reducing financial risk for councils and enabling a longer-term strategy to reduce dependence on costly temporary housing.
The government has also committed £39 billion over ten years (2026-27 to 2035-36) for its successor to the Affordable Homes Programme. This includes expanded funding certainty for providers, supporting new developments that will include social rent, affordable rent, and shared ownership homes. London alone will receive up to £11.7 billion of this funding, reflecting its outsized homelessness challenges.
A new £100 million programme targets early interventions in homelessness prevention, aiming to address issues before they escalate to crisis levels.
The grant allocation for 2025/26 has increased to £633million. However, the cost of void periods is rising across the UK, potentially causing landlords to miss out on income. This issue is related to the financial pressure councils are under in providing homelessness services.
The Local Government Association, representing councils in England and Wales, has called on the government to provide better support due to the financial gap in meeting their duties on temporary accommodation. Cllr Adam Hug, housing spokesperson for the LGA, has expressed concern about the sudden shift in funding allocation for homelessness services without a suitable transition period. He believes that an uprating of the temporary accommodation subsidy is necessary to address the significant and growing cost pressures faced by councils.
In the first two months of 2025, 126,040 households were in temporary accommodation, an increase of 15.7% from 2023. As a result of these changes, councils have up to £76million less to spend on temporary accommodation compared to last year.
New research published today found that many English councils are struggling with the demand for homelessness services. Cllr Adam Hug has urged the government to ensure councils are sufficiently resourced to provide essential services and help boost growth to communities. He sees the approaching Spending Review, with the second half due to be delivered in spring, as an opportunity to address the financial pressure councils are under in regards to temporary accommodation costs.
The government's responses and proposed support are intended to address both the immediate pressures on councils and the systemic causes of homelessness in England, with a focus on prevention, temporary accommodation, and long-term affordable housing supply.
The government's strategy for addressing the surge in homelessness services among English councils includes an increase in funding for the Local Authority Housing Fund, which is designated for temporary accommodation costs and remediation, aiming to improve the quality of temporary accommodation while easing financial burden on local governments. In line with this, theLOCAL government association has urged the government to provide adequate support, as councils face a financial gap in meeting their duties on temporary accommodation, especially considering the rise in costs due to void periods.
