How estate agent firms are cashing in on housing homeless families in London

Middle-man estate agency firms are being paid millions of pounds of public money every month to house homeless families in London, research by Big Issue has revealed.

An analysis of transparency data published by all London’s councils shows five agencies received in excess of a million pounds in a single month last year, through the ‘guaranteed rent’ deals they broker between private landlords and boroughs’ homelessness departments.

The data – covering October last year – shows estate agent Stef and Phillips was paid a total of £3.49m by London boroughs, Elliott Leigh was paid £1.65m, Theori received £1.14m, ZFA received £979,000 and Finefair took £832,000. Much of this money is then passed on directly to private landlords, with the agent taking a cut.   

Each firm operates a similar model where private landlords sign contracts under which they offer ‘guaranteed rents’. The agents then lease rooms to councils to provide to homeless families and charge a fee for maintenance costs and their profit margin.

This housing model has been a way of providing homeless accommodation in London for more than two decades, but its use has exploded in recent years as homelessness numbers have risen.

By September last year, 75,800 homeless households were in temporary accommodation in the capital – 56% of the country’s total. This is a 205% rise since 2010. London has nine times as many families who have been in temporary accommodation for five years as the rest of the country combined.

London Councils, the umbrella body for London’s 33 local authorities, says the model of ‘guaranteed rent’ housing had been around for at least 20 years, and helped councils secure the accommodation needed to meet their statutory duties.

“However, over the past few years the cost of that accommodation has risen dramatically,” a spokesperson for the group said. As a result of the rising demand, the agencies were shifting units that had been let to councils on a long-term basis to much more expensive ‘nightly rates’.

“Boroughs tell us that for properties that they’ve leased previously over a number of years, when those leases come to an end, the landlord comes back and says ‘you have to pay on a nightly rate now’,” they added.

“That’s because the demand is so strong. There is a constant stream of new homeless households – and the supply of accommodation remains relatively limited. Local authorities have little option but to pay the market rate because they have a legal statutory duty to house these households.”

The cost to London boroughs for temporary accommodation now exceeds £5m each day, with much of the money coming from the council’s general funds – which means it is drawn directly out of the cost of other services to Londoners.  

London Councils commissioned analysis from the London School of Economics estimating that the annual shortfall in government funding for temporary accommodation is equivalent to £202 per household in the capital – or 11% of the average council tax bill.

“We didn’t have anything like the scale of nightly paid housing we have now even three or four years ago,” said one director at a London local authority, speaking anonymously.  “Boroughs need to find temporary accommodation, the borough has a duty to provide emergency accommodation, they have got no option but to find somewhere, it’s a sellers market.”

Danny Turner, founder and director of the charity Keep It Moving, which works with young people in temporary housing, said he had seen ‘rent-to-rent’ agencies charging councils upfront cash payments of as much as £7,000 to take certain households – on top of the rents they charged.

He said the housing model was becoming so widespread in parts of London that it was driving up regular rents and undermining neighbourhoods.

“It’s so much more lucrative to convert property into temporary accommodation than to lease in the general market,” he said.

“In some parts of the city it’s this, rather than gentrification that causes rents to go up. It’s the state pushing up rents from below. If you are getting £1,100 a month for a studio flat, then that is what you can charge. This feeds what every day people are experiencing all the time in London: inflated rents, broken communities, people having to move out of the city.”

Stef and Philips, the largest recipient of cash in our research, says on its website that it began as “a small family business”, but now operates UK-wide with 4,500 units of accommodation worth more than £1.1bn managed from its offices in Enfield. It markets itself to corporate investors as a means to build their “social housing asset portfolio”.

While our research does not show anything about the quality of the properties offered to residents, ZFA previously faced protests from a renters union about the quality of accommodation provided in Newham.

Read more:

• The number of homeless children in England could fill Wembley Stadium twice: ‘A clear failure’
• 104 children’s deaths linked to living in temporary accommodation: ‘We should be outraged’
• Croydon family spends staggering 9,500 days in so-called temporary accommodation

Tenants in guaranteed rent accommodation in particular can find themselves caught between the council, the managing agent and the actual landlord when they seek repairs.

“A lot of these nightly-let privately run places have a lack of accountability and a lack of scrutiny. So we see some of the worst inhumane conditions that you would ever want to live in,” said Sam Pratt, policy and communications officer at charity the Shared Health Foundation – although his comments were made in general terms, not directly in relation to the specific agencies listed in this article.

“Just this week we were supporting a mum who had just had a pre-term baby, and came back home from hospital, to find rat droppings on the bed and a vermin underneath the bed.

“We raised it with the council and raised it with the private provider. The rat is still there. No one has moved it. And we see these stories time and time again of overcrowded, moldy, damp, dark, unsuitable places without the right facilities, no decent kitchens or bathrooms.”

Elliott Leigh, meanwhile, manages 2,000 properties and says it has housed 50,000 tenants. In March, it published a “complete action plan” for landlords who wanted to serve an eviction notice before restrictions in the Renters’ Rights Act came into force in May.

Susie Dye, housing lead at the charity Trust for London, said there are increasing signs that landlords are moving properties that had been regular private rented accommodation into the temporary housing market instead – which has resulted in existing tenants being evicted and becoming homeless.

“Evicting people from their homes in a mindless rush for profit only worsens the housing crisis,” she said. “We need emergency measures to move towards the long term, not push the solutions further away.”

Big Issue gathered the data by analysing publicly available spreadsheets detailing expenditure above £250, published by each local authority. Camden’s data could not be downloaded, while eight boroughs publish their data quarterly. These figures were divided by three to give an estimated value for a single month.

All five companies were contacted for comment.

Leigh Young, director at Elliot Leigh, told Big Issue: “We recognise the wider concerns being raised around temporary accommodation, particularly in relation to cost and quality. These are important issues, and it is right that there is scrutiny across the sector.”

Young added that the firm “only works with landlords who are willing to meet expectations” that prioritise property standards, compliance and ongoing management.

“The context is that many local authorities simply do not have access to the level of housing resource they need, particularly for temporary accommodation and supported housing,” added Young. “Our role is to help bridge that gap by working with private landlords to provide a reliable supply of homes that meet local authority standards. Importantly, this model can also help reduce reliance on more costly and less suitable forms of temporary accommodation, such as hotels and hostels, by providing longer-term, stable housing options.”

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