London’s boroughs are facing financial crisis as they struggle to cope with skyrocketing homelessness costs, spending an estimated £4 million daily on temporary accommodation, according to a stark new report from the Public Accounts Committee.

The scale of the crisis is unprecedented, with 183,000 Londoners – one in every 50 residents – now homeless and living in temporary accommodation. Perhaps most alarming is that almost 90,000 of these are children, meaning statistically, at least one child in every London classroom is homeless.

“London is the epicentre of the national homelessness crisis,” warns Cllr Grace Williams, London Councils’ Executive Member for Housing & Regeneration. “The number of Londoners in temporary accommodation is going through the roof. The impact on individuals – especially families with children – is devastating.”

The financial impact on local authorities has been severe. London boroughs are projected to overspend their homelessness budgets by more than £270 million in 2024-25 – double the figure from just twelve months ago. Temporary accommodation costs have surged by 68% over the past year alone.

A key issue identified by London Councils is the ongoing freeze of the Local Housing Allowance subsidy for temporary accommodation at 2011 rates, despite dramatic increases in actual costs. Data from 24 boroughs reveals a gap exceeding £96 million between actual costs and what councils can recover from government through housing benefit subsidy.

The situation in the private rental sector is equally challenging. Research shows only 5% of London’s private rental listings are affordable to households relying on Local Housing Allowance, forcing more families into temporary accommodation.

London Councils is calling for immediate government action, including:

• Removing the 2011 cap on Local Housing Allowance for temporary accommodation
• Making recent increases in Local Housing Allowance rates permanent
• Developing a comprehensive cross-departmental strategy to reduce homelessness

The Public Accounts Committee’s report describes councils across England as being at “breaking point” as they “haemorrhage funds” to cover rising housing costs. The situation in London, where housing pressures are most acute, poses a critical threat to boroughs’ financial stability.

As local authorities await government response to these urgent calls for action, the human cost continues to mount, with thousands of London families caught in an increasingly unsustainable system of temporary accommodation.