London councils’ forecast £250m overspend on homelessness, London Councils warns

London boroughs are expected to overspend by £250m on homelessness during this financial year, despite increasing funding to tackle the issue. This represents a nearly 40% increase compared to last year. 

Making its submission to the Treasury ahead of the Budget on 30 October, where the Chancellor will also set out her Spending Review decisions for 2025/26,  London Councils’ has said the top priority must be to stabilise local government funding.  

In the 2023/24, 29 of London’s 33 local authorities exceeded their homelessness budgets, resulting in a total overspend of £208m.

Across all budgets and service areas, London Councils estimates that boroughs will overspend on their original budget plans by over £600m in 2024/25. 

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Next year, the group expects there will be a funding gap of £700m for all London boroughs. However, the budget submission notes that “this is prior to the knock-on impact of overspending this year, so is likely to rise even further”.  

London Councils said it is “extremely concerned” about boroughs’ housing revenue accounts (HRAs). It reported that three London boroughs are facing an “unprecedented situation,” with forecasts indicating they might run out of HRA reserves in the next four years. 

Earlier this year, London Councils published analysis showing that boroughs face a ‘black hole’ in their social housing finances of £700m between 2023/24 and 2027/28 as a result of the previous government’s interventions to cap social rent increases.  

London Councils said that as with so many councils across the country, there is a very real possibility of boroughs needing to issue Section 114 notices.

One of the organisation’s asks of the government ahead of the autumn budget is to increase core spending power by 7% in real terms, to close the £700m funding gap London boroughs face. 

The submission also requests additional Affordable Homes Programme grants to boost affordable housing in London and to lift restrictions on using 100% of Right to Buy sales receipts for new homes. In addition, it calls for a revised HRA debt settlement to provide new financial capacity.

Boroughs are also seeking long-term funding settlements of at least three years and fewer bidding pots where councils compete for government funding.

Councillor Claire Holland, chair of London Councils, said: “The housing crisis is having a devastating impact on Londoners’ lives and wreaking havoc on town hall finances across the capital.

She added that demands on housing and homelessness services are “the fastest growing risk” to London boroughs’ finances.

“At a time when we need to invest in social housing and support homeless Londoners, boroughs are facing an unrelenting squeeze on our resources.”

“The unavoidable reality is that spiralling costs and years of underfunding threaten to break boroughs’ budgets.”

Holland said that “the current outlook is bleak”, but that London Councils is committed to working with the government to find a better way forward.

She said: “The upcoming Budget is a crucial chance for the government to restore much-needed stability to council finances and the local services we provide.

 “This will enable boroughs to play our part in tackling the capital’s housing crisis and driving economic growth in London and across the country.”