Cost of housing homeless people in London £4m a day

An estimated one in 50 Londoners are homeless

London’s local authorities have warned that "skyrocketing" numbers of homeless people represent the fastest-growing risk to their financial stability, costing them around £4m a day.

It comes as London Councils, which represents the 32 boroughs and the City of London, said ahead of next week’s Budget that they collectively face a funding gap of at least £700m in the financial year 2025-26.

New analysis of government data on council spending has shown that the capital’s boroughs spent almost £1.6bn on homelessness in the last financial year, including £114m per month on temporary accommodation.

The government has said councils already receive funding to pay for temporary accommodation costs.

The number of people sleeping rough in London has risen by 58% in ten years

More than 183,000 Londoners are estimated to be homeless and living in temporary accommodation arranged by councils, the highest-ever level of recorded homelessness in the capital. That is equivalent to around one in 50 Londoners.

Almost one in every 20 children in the capital is living in temporary housing, and it is estimated the number of people sleeping rough has risen by 58% in the last decade.

The Local Government Association (LGA), the national membership body for local authorities, has written to the chancellor of the exchequer Rachel Reeves ahead of her Budget, saying councils are facing a financial "perfect storm".

It said a 22% real terms cut in core spending power since 2010-11, spiking inflation in recent years, unfunded increases in the National Living Wage, and growing demand for services meant costs were increasing faster than their funding.

London's councils have written to the chancellor ahead of the Budget

The LGA said: "We do not underestimate the difficult decisions you will have to take in your first Budget, but stabilising the local government sector financially will not only protect key services, it will also provide a return on investment to the tax-payer, while improving outcomes for the people and places councils serve."

The Budget, the first from the Labour government elected in July, will be delivered on Wednesday.

Analysis from the independent think tank Institute for Government says the Budget, which will set firm spending plans for next financial year, is the first time the government "will be forced to choose between services that are all crying out for more funding".

The IFG predicts that "the criminal justice system and local government will be particularly concerned, as high demand and financial fragility respectively mean that low settlements will make it incredibly hard to improve performance".

A Ministry for Housing, Communities and Local Government spokesperson said councils already receive funding to help meet the cost of temporary accommodation, but the government "will provide them with more stability through multi-year funding settlements".

"The Deputy Prime Minister is taking action to tackle homelessness with ministers across government through a dedicated Inter-Ministerial Group where they will develop a long-term strategy to get us back on track to ending homelessness," it added.