Managing temporary accommodation costs requires greater collaboration

At these levels, local authorities are at risk of bankruptcy and therefore unable to support some of the most vulnerable people in society. With time running out, establishing a joined-up approach to the crisis is now essential.

What is driving the temporary accommodation crisis?

The temporary accommodation crisis has been years in the making and is rooted in a chronic gap between housing demand and supply. Homelessness and the number of asylum seekers needing emergency accommodation have increased rapidly since the start of the decade and the situation has only been compounded by the national shortage of social and affordable housing. With nowhere to house people, local authorities have been forced to rely on private, temporary accommodation as a ‘quick fix’ solution.

The pressure on local government has not been helped by the fast-tracking of asylum applications from specific countries by the Home Office to clear its backlog. As a result of this, thousands more people are now entering the 28-day ‘move-on’ period and subsequently depending on local government to provide housing in line with their statutory obligations.

Some authorities have called for the move-on period to be extended to 56 days and additional funding from central government to cover move-on support and accommodation – for example, to pay the first month of rent. However, it’s clear from the Autumn Budget that central government is not in a position to provide the significant funding required to tackle the temporary accommodation crisis. Whilst welcome, the additional £233 million allocated for homelessness in 2025-26 is a drop in the ocean and means the onus is still on local government to make ends meet.

How could the temporary accommodation crisis be addressed?

Greater collaboration across industries would go some way to alleviating pressure on local authorities. For instance, by exploring opportunities for an alliance between local and central government and modular building suppliers. A method of construction where components are produced offsite and assembled on site, modular building is relatively efficient and could boost housing capacity quickly whilst permanent accommodation is under construction.

Leased modular buildings have already been used to plug social and affordable housing gaps but local government must consider land availability and the associated accounting implications for this solution to be viable. For instance, local authorities are now required under IFRS 16 Leases to report ‘Right of Use’ (ROU) assets on their balance sheets and factor this cost into their annual budget. The cost of hiring modular buildings would therefore eat into local authorities’ housing budgets, which could come at the expense of spending on private temporary accommodation. Local authorities should weigh up the cost savings made through leased modular accommodation as there could be an opportunity for greater collaboration between local government, central government and modular suppliers to establish large-scale housing agreements.

Other key avenues that must be considered by local government include establishing procurement partnerships with private sector companies. This involves setting up ‘payment-by-results’/outcome-based contracts that require private sector partners to locate the most affordable temporary accommodation in a given area, subject to KPIs such as quality, in return for a percentage of the total savings the property provides the local authority. This type of arrangement is already in use through social impact bonds (SIBs) for providing children’s social care and the rehabilitation of offenders so there is scope for applying this to temporary accommodation too.

Other solutions that should be explored include greater collaboration between local government and not-for-profit organisations, such as housing associations. This could include:

• Developing SIB arrangements where housing associations can deliver significant savings.
• Housing associations earmarking property voids for emergency accommodation.
• Land management, including the sale or gift of land to housing associations for the purpose of providing accommodation or social housing over which the local authority has nomination rights.

Given housing associations’ experience managing properties and handling complex tenant needs, their input could prove vital for cash-strapped local authorities who typically lack these resources internally.

Key takeaways

For any solution to the temporary accommodation crisis to work for local authorities, central government must implement multi-year funding settlements for local government. Without this, local authorities will remain in the dark over future funding capacity.

With the situation reaching a head, here are some key takeaways for local and central government to consider:

• Compare the cost savings of hiring modular buildings and temporary accommodation. Is modular a viable interim solution?
• Establish procurement partnerships between the private sector and local government to source more affordable temporary accommodation.
• Develop more effective partnerships between local government and housing associations. Explore the scope for SIBs and earmarking land for housing associations.

For more information, contact Jon Coane.

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