DWP told to justify freezing housing benefit amid surging homelessness and skyrocketing rents

The government has been urged to lay out whether it considered the impact of freezing local housing allowance (LHA) on homelessness in a damning report from the Public Accounts Committee (PAC).

MPs on the committee, which scrutinises government spending, called for the Department of Work and Pensions (DWP) to justify failing to raise LHA rates in April, despite skyrocketing private rents leaving low-income households on housing benefit struggling to find a place to live.

LHA is supposed to ensure housing benefits cover the bottom 30% of market rents and the Tories opted to unfreeze rates in 2024 after four years.

But Labour opted not to follow suit at the autumn budget, despite evidence that shows 45% of households face a shortfall between the benefits they receive and the rent they have to pay. 

Both deputy prime minister Angela Rayner and homelessness minister Rushanara Ali have been quizzed about the decision at the housing select committee in recent weeks. Rayner said there were “multiple factors” to consider in terms of which funding decisions are driving or preventing homelessness. Committee chair Florence Eshalomi wrote to Rayner on 23 January to express MP’s “deep concerns”.

Now, PAC members have called on the government to set out its reasoning over “concerns at the subjectivity of DWP’s judgements and that it cannot say what impact raising LHA rates would have on homelessness”.

The committee also raised the alarm over how surging homelessness is pushing local authority finances to the limit and leaving people house in unsuitable temporary accommodation.

“A lack of affordable housing, a focus on short-term solutions and no clear strategy to tackle this issue have left us with thousands of families in deeply troubling circumstances,” said sir Geoffrey Clifton-Brown, chair of the committee. 

“Worryingly there seems to be no desire to move away from an unsatisfactory short-term system, leaving local authorities attempting to save a sinking ship with a little more than a leaky bucket. 

“Local authorities find themselves at breaking point as they haemorrhage funds to cover the rising costs of housing families in temporary accommodation. We are calling for an overarching strategy that addresses the need for better connectivity across government departments to tackle the root causes of this crisis. Without one, we fear this will remain an issue into which money is simply poured, without effectively tackling the blight of homelessness. government must learn from the lessons of the past to inform what they will do in the future.”

The Labour government recently announced almost £1bn will be spent on tackling homelessness in the next year, including an uplift in prevention spending and pilots to reduce the reliance on bed and breakfast accommodation in 20 of the hardest-hit areas.

Ministers are also currently working on a long-term strategy for tackling homelessness in England, which is expected to be revealed following June’s comprehensive spending review.

Labour’s long-term plan to reduce record-high homelessness is through building 1.5 million homes, including a “new wave of social homes”.

A government spokesperson told the Big Issue: “These figures are completely unacceptable and demonstrate the devastating homelessness crisis we have inherited.

“This is why we are taking urgent and decisive action to end homelessness for good, including committing £1bn in additional support for homelessness services and address the use of emergency accommodation.

“We’re talking the root causes of homelessness, committing in our Plan for Change to build 1.5 million new homes, which includes building the social and affordable homes this country needs, and are changing the law to abolish section 21 ‘no-fault’ evictions – immediately tackling one of the leading causes of homelessness.”

The PAC said an over-reliance on the use of temporary accommodation, due in part to a dwindling and increasingly costly housing stock.

Around 123,000 households are living in temporary accommodation in England as of June 2024, including almost 160,000 children.

The report shows local authorities spent over £3.1bn on delivering homelessness services in 2023-24 across England with £2.1bn going on temporary accommodation. 

The committee criticised the amount of public spending on emergency measures compared to prevention. MPs called for the government’s long-term strategy to lay out how preventative measures will be incentivised in future.

Big Issue founder and crossbench Lord John Bird has long argued for a focus on prevention while the Labour government has pledged to switch towards trying to stop people falling into homelessness in the first place.

Lord Bird said: “The Public Accounts Committee’s report shows that the taxpayer is footing a bill of billions that is being poured into sub-standard, overpriced and inappropriate temporary accommodation for the homeless.

“Our local authorities have floundered in the absence of grown-up, joined-up government leadership. While I am encouraged by the new Labour government’s initial steps to improve this, we need their promised ‘largest ever investment’ in homelessness prevention to materialise quickly. We also must ensure these preventative funds are spent wisely and don’t end up used on yet more sticking plasters for this spiralling crisis.

“The government should urgently implement this report’s recommendation of introducing new ways for the Ministry of Housing, Communities and Local Government to incentivise local authorities to improve preventative activities. Only prevention can finally turn the tide of homelessness in this country.”

The PAC also raised deep concerns about the number of families being outside their local area due to a shortage of viable housing.

Around 39,000 families are being housed out of area, the committee reported, while 6,000 homeless families with children are living in B&Bs with a detrimental impact on childrens’ wellbeing.

The government should encourage better coordination between local authorities and set out how it will support them to reduce the use of B&Bs, MPs recommended.

Jen Clark, economic, cultural and social lead at Amnesty International UK, said the PAC report showed the homelessness crisis was “escalating and exacerbated by government failings”.

Clark added: “These repeated failures mean we continue to see such heartbreaking tragedies as the one last week, where someone froze to death trying to seek warmth and safety in a bin in London – mere miles from our prime minister’s front door. This horror is on Number 10’s watch and was wholly preventable. Homelessness is a political choice.”

But moving beyond the current homelessness emergency towards taking preventative measures is likely to be a challenge – particularly in London.

London Councils estimated that boroughs collectively spend £4m every day on temporary accommodation – and this spending has increased 68% over the past year.

The government has pledged to increase funding through the homelessness prevention grant, rising to £633m nationally – up £192m on spending in 2024-25 with £80m extra for London boroughs.

But the increased cash comes with a stipulation that 49% of the grant funding must be spent on prevention. London Councils has warned this will mean it will have to draw on already stretched general funds as 80% of homelessness prevention grant spending currently goes on temporary accommodation. 

Social housing waiting lists in the English capital hit the highest point in a decade, the cross-party group revealed earlier this week, at 336,366 households and accounting for 25% of England’s national total.

Among the recommendations for central government is a plea for the government to raise LHA rates and remove the cap on the amount local authorities can claim from the government for temporary accommodation costs.

Freezing the subsidy at 2011 rates is costing London boroughs £96m a year while the national financial blackhole is more than £200m.

Councillor Grace Williams, London Councils’ executive member for housing and regeneration, said: “London is grappling with the most severe housing and homelessness crisis in the country. The capital is becoming increasingly unaffordable and, as these numbers demonstrate, there is a desperate need for more social housing.

“Boroughs are determined to turn the situation around. We are strongly pro-housing growth and as committed as ever to working with the government to turbocharge housebuilding in the capital. We are also working to ensure we have the resources needed to cope with the immediate homelessness pressures we are facing.”

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