The gap between the amount of money councils are paying in housing benefit and the amount they are reimbursed from the Department of Work and Pensions increased to £266 million, new analysis has found.
This means that the amount of money that councils are losing grew by a third (30 per cent) in just a year, adding further pressure to already stretched budgets and diverting money away from services to prevent homelessness. This challenge risks being exacerbated by the reduction of the Move On period back to 28 days for single adults and we ask the Government to work with us on resolving this issue.
There are 131,140 homeless households living in temporary accommodation where housing costs can be covered by claiming housing benefit. Councils pay the cost of that housing benefit upfront and are paid back by the DWP.
While households receive the full housing benefit they are entitled to, the amount councils can claim back is currently capped to 90 per cent of Local Housing Allowance (LHA) rates from back in 2011.
This means councils are not able to claim back costs that reflect what they are spending, and it is increasingly getting worse as the demand rises under a higher LHA rate.
Latest figures show that in 2023/24 the total spend for councils in England was £1.04 billion, while the DWP only reimbursed £780 million to councils which has left a £266 million gap.
This has increased by 30 per cent from the previous year, and over the last six years the total gap cost to councils is £1 billion.
The LGA is calling for the rate of reimbursement to be lifted from the 90 per cent of the 2011 LHA rate to 90 per cent of the current LHA rate.
Had the rate of reimbursement been lifted from the 90 per cent of the 2011 LHA rate to 90 per cent of the current LHA rate, a long-term LGA ask, councils would have had £941 million reimbursed rather than £780 million.
This would ultimately help reduce the pressures on council finances and support preventing homelessness.
Cllr Tom Hunt, Chair of the LGA’s Inclusive Growth Committee, said:
“Councils are caught in a vicious cycle of ever-increasing temporary accommodation costs versus static rates they receive back to cover their costs.
“Current housing benefit reimbursement rules for temporary accommodation are outdated – councils must pay landlords according to current market rates, whilst reimbursement for councils is linked to 2011 rental rates.
“This is effectively penalising councils for supporting families in temporary accommodation – a challenge which has seen an upward trajectory.
“This needs to change and government needs to act, specifically by making the rate the current rate, as opposed to one that’s 15 years old.”
