The government has almost doubled its rough sleeping budget ahead of the Budget. That is welcome. But the far bigger cost sitting in council budgets is temporary accommodation, and the subsidy that is meant to pay for it has not moved since 2011.
On 26 October the Prime Minister, Andy Burnham, announced a further £432m to tackle rough sleeping, to be confirmed in the Chancellor's Budget on 28 October. According to Inside Housing, that takes the total committed to his pledge to £874m and extends support beyond March 2027 to the end of this Parliament. Housing associations, through the National Housing Federation, have identified more than 2,000 potential homes and bedspaces to help.
"Rough sleeping isn't a fact of life," the Prime Minister said. He is right. And I want to be clear: this is good news, and multi-year funding is exactly what councils have been asking for.
But if you are a Section 151 officer, rough sleeping is not the line in your budget that keeps you awake at night. Temporary accommodation is.
The crisis behind closed doors
Rough sleeping is the most visible form of homelessness. Temporary accommodation is the largest, and the most expensive.
MHCLG's statutory homelessness statistics, published on 13 August, show 135,580 households in temporary accommodation in England on 31 March 2026, up 3.6% on a year earlier. Those households included 177,530 children, up 5.2% in a year. That is a small town's worth of children growing up in hostels, B&Bs and nightly paid flats.
The cost is staggering. Analysis of MHCLG's revenue outturn figures, published on 17 September, shows councils spent £2.93bn on temporary accommodation in 2025-26, as reported by LocalGov. That is around £8m every single day, and 88% more than five years earlier. Spending on nightly paid self-contained accommodation alone reached £955m, up 348% over the same period.
In London, where the pressure is most acute, London Councils says boroughs collectively spend £5.5m a day on homelessness provision. Nine of London's 33 local authorities are now receiving Exceptional Financial Support.
A subsidy frozen in 2011
Here is the part that should anger anyone who cares about sound public finance.
When a council places a homeless household in temporary accommodation, the housing benefit subsidy it can claim back is, for most placements, capped at 90% of the Local Housing Allowance rate as it stood in January 2011. Not today's rents. Not last year's rents. Rents from fifteen years ago.
The House of Commons Library sets out what that means. Councils' share of temporary accommodation costs has risen from 7.1% in 2009/10 to 50.6% in 2024/25. In 2024/25, of £2.84bn gross spending, £1.43bn fell on councils after subsidy and household contributions.
Put simply, every new placement now costs the council more than it did the year before, and the gap is met from the general fund. That money has to be found from other services: adult social care, children's services, libraries and parks.
The Local Government Association has described temporary accommodation as "a huge leak in council budgets that needs to be patched quickly". It has called for the subsidy to be uprated to 90% of current LHA rates. That is a modest, targeted ask.
The front door is getting wider
The subsidy freeze is only half of the problem. The other half is what pushes households into temporary accommodation in the first place.
Research from Citizens Advice, reported by Inside Housing on 19 October, found that 58% of privately renting households receiving housing benefit across Great Britain do not get enough support to cover their rent. Rents in England have risen by an average of 18% since the data used to set current LHA rates was collected, and housing benefit was last increased in April 2024.
Every household that cannot bridge that gap is a potential homelessness approach. When a private tenancy fails, the bill lands with the council, at nightly paid rates, with subsidy calculated on 2011 rents.
As Shelter put it in September, we have spent years "treating the symptoms of the housing emergency, without addressing its cause."
What the Budget needs to do
The rough sleeping money shows this government is willing to commit multi-year funding to homelessness. The test of the Budget is whether it applies the same logic to the structural drivers. For council finances, three things matter most:
- Uprate temporary accommodation subsidy to current LHA rates, so councils are not funding a growing share of every placement from the general fund.
- Restore the link between LHA and local rents, so fewer private tenancies collapse into homelessness.
- Back councils to own their temporary accommodation, through grant and access to long-term capital, so they can move away from the nightly paid market.
If those are missing, the £874m for rough sleeping risks treating the most visible symptom while the much larger cost continues to grow.
What this means for councils
Whatever the Chancellor announces, Section 151 officers and housing finance leads should not wait for Whitehall to fix the subsidy system. There are practical steps to take now.
Model the subsidy gap explicitly. Your MTFP should show the net cost per placement by accommodation type, not just gross spend. That is the number that tells you where the money is leaking.
Stress-test for no change. Assume the 2011 subsidy cap stays and LHA remains frozen. If your plan only balances on a policy change, it does not balance.
Make the case for ownership. In my experience, owned or long-leased temporary accommodation is far cheaper over its life than nightly paid placements. I have seen this first-hand at Westminster City Council, where I worked on a 42-year institutional funding structure to acquire 368 homes, and a £50m, 40-year index-linked sale-and-leaseback of 124 temporary accommodation properties with the City of Westminster Pension Fund. Long-term, inflation-linked capital is available for well-structured schemes. The challenge is building the business case and the governance to use it.
Bid for the new money, but plan beyond it. The extended rough sleeping funding is an opportunity. Use it to build provision that will still be standing, and still affordable, when the funding ends.
The rough sleeping announcement shows what is possible when government decides a problem is unacceptable. More than 177,000 children in temporary accommodation should be just as unacceptable.
If you would like to talk through your temporary accommodation costs, your MTFP assumptions or options for funding new supply, please get in touch.
Sources
Inside Housing: Rough sleeping funding to double in Autumn Budget (26 October 2026); Inside Housing: Housing associations identify 2,000 homes for rough-sleeping initiative (26 October 2026); House of Commons Library: Autumn Budget 2026; MHCLG: Statutory homelessness in England, January to March 2026; LocalGov: Councils spend £8m a day on temporary accommodation (17 September 2026); MHCLG: Local authority revenue expenditure and financing 2025 to 2026 first release; London Councils: Budget 2026 submission (22 September 2026); House of Commons Library: Temporary accommodation in England, issues and government action; Local Government Lawyer: LGA homelessness position paper (9 July 2026); Inside Housing: Housing benefit does not cover rent for more than half of private renters (19 October 2026).