Innovative housing strategies for councils after ‘asylum hotels’ injunction

First published on The MJ.

As the pressures facing local authorities in housing vulnerable people were brought to life in the ‘asylum hotel’ legal case, Victoria Searle sets out some innovative solutions for sourcing low-cost housing. 

Earlier this month, the High Court granted a temporary injunction against the owner of the Bell Hotel in Epping Forest, preventing its use as an “asylum hotel” while the court determines whether planning permission is required. 

This case has shone a spotlight on the wider challenges in sourcing low-cost housing for those in need. The court’s final judgment, which isn’t expected until later this year, could have broader implications for both local and national government. 

National housing crisis

The UK faces a severe social housing shortage, with families on waiting lists in England rising 37% since 2015, according to the National Housing Federation. 

While the government's plans to build 1.5 million homes this Parliament, and its £39bn Social and Affordable Homes Programme, will help in the longer term, these policies won't address immediate housing needs.

Meanwhile, Home Office figures show there are more than 32,000 asylum seekers living in hotels, while Shelter's research revealed 326,000 homeless people living in temporary housing as of December 2024.

Local authorities face unprecedented pressure on their homelessness services, and increasingly rely on block-booking hotels and bed-and-breakfast accommodation for emergency housing. 

These are expensive and can often fall short of meeting residents’ needs, with government data showing out-of-area placements at record highs. 

Innovative solutions to low-cost housing 

Local authorities must develop long-term housing strategies that can meet their immediate obligations, reduce their reliance on costly nightly-let accommodation, and future-proof their services against increased demand. 

We’ve recently supported local authorities with a range of initiatives, which include: 

• Acquiring new housing stock: Purchasing new build turn-key developments, ensuring immediate availability for those in need. 
• Repurposing existing properties: Acquiring redundant office spaces for conversion into residential units, in reliance on new permitted development rights. 
• Securing mixed-use developments: Purchasing entire blocks that combine residential and commercial spaces, which can generate investment income as well as providing housing.
• Options over new development sites: Retaining options or pre-emption rights over affordable housing units when selling off land for development. 
• Leveraging planning powers: Utilising Section 106 agreements to secure affordable housing for the local authority as part of larger private developments.

Joint ventures and partnerships with private developers, particularly as part of the broader regeneration of an area, can also enable local authorities to achieve more with limited resources.

Funding temporary accommodation with new legal approaches

Of course, these measures require significant capital investment at a time when local authorities face significant budget shortfalls and constraints on borrowing. 

Local Government Association analysis published in August found the gap between how much local authorities pay in housing benefit and the amount they receive through subsidy from central government has grown by 30% in the past year to £266m. 

In reality, the funding shortfall is significantly greater than this, as local authorities incur additional costs that aren’t covered by housing benefit payments. 

In response to this trend, we’ve also supported many of our local housing authority clients to develop innovative new approaches to procuring temporary accommodation in a financially sustainable way. These have included:

• Repurposing existing housing stock for temporary use, by removing properties from the part 6 allocation pool and granting non-secure tenancies to homeless applicants instead.

• Renegotiating existing arrangements on longer-term bases, securing lower rents and increased subsidy in the process. 

• Partnering with developers on mixed-use projects that will deliver affordable housing and homes for social rent.

• Acquiring properties through wholly-owned companies that can manage the properties and let them to tenants nominated by the local authority.

• Increasing the use of exempt accommodation.

• Leveraging social impact investment to fund temporary accommodation projects.

These types of projects have enabled authorities to increase their supply of temporary accommodation – thereby reducing their use of hotels and B&Bs – while cutting their housing benefit subsidy gap. 

More homeless households have also been moved into more settled accommodation, while improving the quantity and quality of temporary accommodation overall.

Legal considerations for authorities include the most appropriate legal powers for acquiring and providing temporary accommodation, accounting and housing benefit subsidy rules, rent caps and standards, legal challenges to out-of-borough placements, and procurement and subsidy control rules when using council-owned companies.

While there’s no silver bullet to the housing crisis for vulnerable people – both the homeless and asylum seekers – by planning for the long term, local authorities can at least begin to take control.