11 Mar 2025
CIH submission to the technical consultation on the Homelessness Prevention Grant 2026/27 onwards
We welcome the opportunity to respond to the consultation on the Homelessness Prevention Grant (HPG) 2026/27 onwards.
Since the election, it has been encouraging to see the government’s action on increasing local authority and homelessness funding and commitment to developing homelessness and housing strategies. We support the government’s intention through reform of the HPG to shift focus away from unsustainable local authority spend on temporary accommodation (TA) towards homelessness prevention and the intention to simplify the funding landscape and ensure the HPG is based on the most reliable data sources.
However, we have concerns that without additional funding to the HPG and accompanying reform, the proposed funding formula changes undermine some local authorities’ ability to address the escalating homelessness crisis.
Summary
We have outlined our responses to the consultation questions below, answering those of which are relevant to our position as the professional body for the housing sector, and local authorities and representatives will be best placed to address specific technical points. Our response seeks to ensure that this review of the formula aligns with broader governmental aims to address the housing and homelessness crisis and to assist the department in its stated aim of avoiding unintended consequences through these changes.
Our headline points are as follows:
- Overall funding for the HPG should rise to appropriately respond to the escalating homelessness crisis facing local authorities.
- The HPG is only one mechanism to prevent homelessness; as such, we urge the government to address the supply of genuinely affordable homes at social rent and reform social security to support households adequately.
- Proposed changes to the data sources used to allocate the split of HPG funding will result in some local authorities receiving substantial cuts to their HPG funding from 2026/27 onward, including some with significant homelessness pressures. We urge that no local authority loses funding due to these changes.
- Ensure the HPG is a flexible fund that encourages partner-working and joint funding across funding streams, sectors and organisations such as health and supported housing.
Drivers of homelessness
The greatest challenge for local authorities in preventing and relieving homelessness is the lack of truly affordable accommodation, particularly in high-value areas. Given the continued cost of living crisis and a failure to build at pace, this challenge will likely increase in the short term. The number of households in temporary accommodation (TA) has more than doubled since its low of around 50,000 in 2010/11, with the latest quarterly statistics release reporting 120,040 households, a 15.7 percent increase from the previous year.
Source: CIH UK Housing Review 2024
We know that TA is often entirely unsuitable for many households and that the private rented sector (PRS) is often the only route out of TA due to the lack of social and affordable housing availability and extremely long social housing waiting lists.
Yet, the lack of affordable PRS properties in many areas exacerbates this situation, and drives further unaffordability for these families in need.
No.
We support targeting funding to where demand is highest, which changes to the formula would achieve, and the exercises undertaken by MHCLG to simplify the formula to ensure that the data sets with the strongest correlation with homelessness are used.
However, there is a risk that some of the proposed metrics may fail to adequately capture the demand and costs of homelessness on local authorities. For example, we would warn that the proposal to access homelessness demand (question 1), ‘total housing benefit (HB) + universal credit (UC) claimants’ may fail to fully encapsulate certain groups' distinct risk of homelessness and local drivers of homelessness due to specific housing market conditions. These could include the availability of homes in the private rented sector at LHA rates, those at risk of homelessness who do not claim benefits such as those in work, some leaving domestic abusers and young people, Home Office accommodation leavers and those subject to no recourse to public funds (NRPF).
Homelessness prevention reaches beyond the work of local authorities' housing teams, extending throughout local authorities and to organisations working in frontline homelessness support, supported housing, housing, health and care. The number of statutorily homeless households reporting one or more support needs has risen yearly from 118,830 reported in 2018/19 to 176,120 reported in 2023/24 and they now outstrip households with no support needs, or none recorded, (150,680 in 2018/19 to 149,870 in 2023/24) whose numbers have largely remained steady across the period.
This increase in recorded support needs could, in part, be explained by a greater public knowledge about subjects such as mental health and neurodivergence and better data recording (although there are some concerns about the reliability of some local authorities' returns on this data). However, the national trend is worth noting concerning the contributory factors to homelessness and the services that households might require to be supported in preventing homelessness or moving on from it.
As such, we recommend that the HPG be flexible in how it can be spent alongside other funding streams and in partnership with other organisations, such as supported housing, health providers or domestic abuse-specific service providers. This will ensure that how the HPG is spent not only reflects relative homelessness costs but facilitates the type of services that need to be provided from it to prevent homelessness effectively.
Indifferent.
We wish to echo concerns from the broader local government representation that the explicit funding for TA within the HPG may penalise councils that have historically used the HPG strategically to reduce the number of households in TA.
Indifferent.
We are concerned that the PRS cost data does not adequately reflect homelessness costs. It is designed to reflect all tenancies rather than the average rental costs for new lettings that are currently available. As a result, it tends to be lower than the rental costs for new lettings, meaning it does not accurately reflect the ability of households to cover the costs of a new rental agreement, which is the most relevant cost for households at risk of or experiencing homelessness.
Additionally, the metric does not account for the scarcity of properties within a local area in the PRS and social housing sector (SHS), which drives the use of more costly forms of temporary accommodation, such as bed and breakfasts and hotels. The concern is that mean rents in the PRS cannot accurately estimate local authority TA costs. Subsequently, authorities with acute homelessness pressures, with a scarcity of homes available at LHA in the PRS or in the socially rented sector from which they can recoup TA subsidy will find their HPG cut and households at risk.
Source: CIH UK Housing Review 2024
Local authority members of the CIH homelessness policy group have highlighted a related issue that further drives the scarcity of affordable homes in the PRS. Some have noticed existing PRS landlords changing to become nightly paid accommodation providers in the pursuit of higher returns. This practice has been seen in boroughs that are non-stock holding authorities who often rely on the PRS to prevent and relieve homelessness. This practice was also noted in The Centre for Homelessness Impacts’ report on achieving value for money in temporary accommodation (2024) and National Audit Office’s Homelessness report (2017). There is a case for reviewing the ease with which PRS landlords can change from general needs provision to nightly paid accommodation provision and the regulatory environment and fiscal incentive that perpetuate this trend.
Funding proportions and transitional arrangements:
We support the government’s aim to shift the focus of the HPG away from TA to homelessness prevention activity. Many local authorities currently operate within an unsustainable and challenging financial environment, with temporary accommodation being a significant pressure. Expectations of a swift transition to high proportions of the HPG being ringfenced for prevention will see TA cost shortfalls further encroach on council tax collections, to the detriment of other services for the entire population and runs the risk of pushing more councils into requiring exceptional financial support from central government.
We wish to highlight warnings that some councils, such as Hastings, could see drastic funding cuts to the HPG exceeding £700,000 under the proposed changes. The government must ensure that local authorities do not suffer unintended financial losses and that funding remains flexible enough to address varying local challenges. Therefore, we support the government’s proposal that there be a phased approach to implementing a change in weighting and the proposal to use transitional arrangements to mitigate changes to funding allocation (Questions 10 and 12).
As a broader point, housing benefit (HB) is a vital homelessness prevention tool. The most effective way to prevent homelessness is through the established benefits system rather than local discretionary homelessness funds. We therefore recommend aligning the link between local housing allowance (LHA) rates and market rents and urgently reviewing the TA subsidy for local authorities.
Visit the government's website for more information on the consultation.
For more information on our response please contact Stephanie Morphew, policy and practice officer on stephanie.morphew@cih.org.
