With annual budgets being prepared in all of England’s councils over the next few months, the scale of the challenge facing council finances looks stark.  

What is clear is that while upper-tier authorities grapple with the challenge of Adults and Children’s social care; a critical challenge for Unitary, Districts and Boroughs is the huge weight of discharging their homelessness obligations by providing immediate Emergency Accommodation and Temporary Accommodation.  

Years of undersupply of social housing, combined with soaring private sector rents and the increased cost of running a household are pushing families on lower incomes to look for support from the council to find accommodation that they can afford. At a very simple level what has happened is that the cost of private rent has increased massively and local housing allowance, which families have used to pay their accommodation costs, has not kept pace.   

We’ve been working with a number of councils on how best they can meet the challenge. As councils increasingly accept that the problem is here to stay, we have started to look at approaches that think and act over the long term. The councils we are working with are really clear that they are looking for interventions that will make an impact today, but also make sense over the long term.  

What are the options:  

Taking into account factors like local housing allowance rates, available grants, house prices, and the long-term cost of maintenance we have been able to work through the pros and cons of different approaches to providing homes. We have identified four different ways to do it:  

1. Use the council general fund to buy homes for Temporary Accommodation (TA).
2. Increase the size of the local authorities’ council housing stock and help people from TA to become council tenants.
3. Set up or use an existing council-owned company to provide homes for private rent that people currently in TA can be offered a tenancy.
4. Set up or use an existing council-owned company to provide homes for TA. 

We undertook financial modelling to explore which option was the best way for councils to approach the problem. We looked specifically at whether buying homes instead of renting them or placing people in hotels will make savings, and how quick it is for an investment to start saving money.  

What have we learned:  

In our modelling, all options produced a saving and all produced a saving within the first 18 months of purchasing the home. It was easy to conclude that doing something was better than continuing with the existing approach as it made savings both in the short and long term.  

As an example, for one council we worked with, our business case identified that for every home built or acquired the Council could make the following savings annually:   

So, in most simple terms, for every home that the Council could buy to replace nightly paid, they would save over £14,000 annually.

Option 2, which involves delivering new council homes on secure tenancies, is the most cost-effective overall for a council. Once grant (from Homes England or the Greater London Authority) is factored in, delivering council houses produced the largest saving. This option also has the lowest rent levels for tenants. It felt to us that the impact of this on residents to go from unstable TA to a council home of their own, would have the biggest impacts on people’s lives and make a difference far beyond just the savings to the Council. 

If the HRA doesn’t have the borrowing capacity, or the council isn’t stock holding, then Option 1 and Option 3 were both almost as cost-effective. In London, Option 1 benefited from the Greater London Authority’s Council House Acquisition Programme (CHAP) grant of £85,000 per unit, but is limited to 199 homes. Option 3 has the added benefit of giving residents a secure tenancy in a rented property that gives them the basis to thrive and allows the council to discharge its housing duty

Option 4 still delivered a substantial saving per annum for each house acquired, and as the company is the landlord, there is no limit on the number of homes that could be delivered for TA in this way.

Conclusion 

Through our work with a wide range of councils across the country, we are hearing a consistent theme that they feel the Temporary Accommodation challenge is here to stay. While every local authority will have a different set of circumstances, our modelling has shown that if it is here to stay, then taking an investment-based approach allows councils to deliver savings in the short and long term, as well as improve quality and support to tenants.  

If you would like to discuss how 31ten can support your authority’s approach to Temporary Accommodation please get in touch with Nick Walford on nick.walford@31tenconsulting.co.uk.