Record-high demand, a chronic shortage of affordable housing and unsustainable financial deficits have created a perfect storm for what is fast becoming one of the defining pressures in local government – temporary accommodation.

At UKREiiF, I joined a panel hosted by 31ten Consulting that brought together senior local authority leaders with voices from the private sector to discuss how we can move the conversation beyond emergency responses and towards delivery models that genuinely work.

A remark from elsewhere at the conference set the tone. Pete Gladwell, Group Managing Director for Public Investment at Legal & General, noted in a separate panel session that there are 165,000 children in unsustainable temporary accommodation (since then, new government figures have been published showing this has risen to 176,130), yet an investor can still make more money sitting on a shoddy bed and breakfast than by working productively with the public sector to provide decent homes at a modest return. 

How have we arrived here? It is a question every housing professional and every minister should be sitting with.

How temporary accommodation became a structural funding crisis for councils

The session was titled ‘Beyond crisis management: Delivering temporary accommodation that actually works’, and the framing matters. 

Cian Cronin, Director of 31ten, opened by noting that 11 councils now have more homes secured for temporary accommodation than in their own permanent social-housing stock.

This is no longer an operational homelessness issue to be managed at the margins, but demands long-term investment thinking.

Joe Garrod, Strategic Director for Place at the London Borough of Waltham Forest, described an 80% rise in temporary accommodation numbers over three years, driven by smaller landlords leaving the market, gentrification, and new housing delivery drying up as the cost of borrowing rose. Temporary accommodation has joined adult and children’s social care among the top three cost pressures facing his council.

Despite a strong social housing track record, led by a joint venture housing company that has delivered hundreds of affordable homes, economic headwinds had stymied the launch of the next phase.

In response, Waltham Forest set up a temporary accommodation mission board spanning early support services, finance, employment, and accommodation procurement — testing as many approaches as possible simultaneously, including taking five-year leases on former Home Office hotels to deliver self-contained family housing, and moving away from hotel use altogether.

But the deeper problem Joe identified is systemic: only 2% of privately rented properties in Waltham Forest are affordable at Local Housing Allowance rates, and households are staying in temporary accommodation for an average of eight years. 

Getting people into work is not enough if there is nowhere affordable for them to move into. The Borough is now scaling up out-of-area procurement and trialling a choice-based lettings model that shows households properties in other parts of the country — an approach that has proved more effective than forced offers.

How Birmingham is tackling £2m-a-month temporary accommodation spending

Naomi Morris, Director of Strategy, Estate Regeneration and Regulatory Compliance at Birmingham City Council, brought a particularly sharp perspective. 

Birmingham accounts for 28% of the UK's bed and breakfast use for temporary accommodation. The local authority is spending more than £2m per month on temporary accommodation for about 5,000 households, and a generation of children are at risk of spending most of their childhood in accommodation that is simply not good enough.

Birmingham's response has been comprehensive: a 2023 housing strategy targeting 1,083 genuinely affordable homes per year (at least 500 at social rent), an acquisition strategy, use of the Local Authority Housing Fund, creating modular units for hard-to-move residents, and extensions on family homes. 

Critically, the Council has also worked with us at Browne Jacobson on a 10-year plus one day leasing scheme designed to move properties out of both the Housing Revenue Account rent-capping regime and the punitive Local Housing Allowance subsidy cap. That legal structure — which required a genuinely multi-disciplinary effort spanning public law, procurement, real estate, tax, and social security law — was the product of real innovation.

One element deserves particular mention. By obtaining non-statutory business clearance from HMRC, we were able to confirm that the Council's leases would not be treated as 'linked' transactions for Stamp Duty Land Tax purposes. Without this clearance, the financial case for the entire programme would have collapsed. The resulting framework is valued at £355m, with combined contracts totalling £500m, and the model is now being replicated by councils across England.

What the sector needs to do differently

From our vantage point advising councils across the country, I see a number of consistent themes.

First, the financing picture is changing. Local authorities cannot borrow enough to solve this problem on their own, and there isn’t enough public subsidy to fund all the new housing stock that is required. But we are now starting to see institutional investors and funds willing to deploy private capital (on condition of an injection of public subsidy to bridge the viability gap) — attracted by the reliability of local authority covenants, and the social value credentials of solving homelessness. 

The emerging model — institutional investor provides capital, commercial partner delivers new stock at pace, local authority acquires the stock, a mutually trusted partner manages it — is where the next wave of these projects is heading.

Second, the legal and structural groundwork matters enormously. Two or three years ago, many councils took the easier route of acquiring rights to use properties on an ad-hoc basis. The sector is now moving towards more formalised acquisition and leasing models, but councils need specialist advisers who can help them to get the structure right from the start, always with a keen eye on continuing revenue costs and budgetary impacts. As Naomi put it, the deals are complicated, and translating them into something that works commercially while managing risk appropriately requires real expertise.

Third, in our view, everyone needs to be more honest about what is going on. There is some very good quality temporary accommodation being provided, but there is also some that is barely habitable. The conditions in which some families are living are unacceptable in a country as wealthy as ours. 

Central government has, to date, found it politically convenient to let local authorities solve this problem for themselves. The consequence is that councils are asking the same questions about risk and legal powers, reinventing the wheel independently, rather than sharing what works openly. 

The case for government action

Joe made a compelling comparison to when the UK rolled out PFI: what the sector needs is a government-backed institutional finance taskforce — standardised procurement packs, model legal documentation, and centralised support — so that councils are not each carrying the full burden of pioneering these structures alone. If everyone knows where the lines are, best practice can be shared, and councils can get on with delivering the solutions their communities need.

The numbers make the case for investment unarguable. The Local Government Association has found that since 2017/18, English councils have spent £1.5bn more on temporary accommodation than they have been reimbursed through subsidies. Spending money on getting these structures right, and investing in the capacity to do so, is surely worth pursuing against that backdrop.

As Andrew Stansbury, Director at Housing Festival, put it, this is not just a housing challenge. It is a housing, procurement, finance, legal, and a leadership challenge. 

Councils need to test every possible solution, and they need to be brave enough to try new models that may challenge established orthodoxies. But the prize of good-quality, stable accommodation for families who need it most, at a cost the public purse can sustain, is worth the effort.

Our key takeaways for councils

To summarise the key messages from the panel, councils need to move beyond crisis management and towards sustainable, well-structured delivery models - and they should not have to do it alone.

• This is a structural crisis, not a short-term problem: With households spending an average of eight years in temporary accommodation, emergency responses are no longer adequate.
• Test multiple approaches at once: Don't wait for a single perfect solution; test different approaches simultaneously, then scale up the most successful arrangements. 
• Get legal and financial structures right from the start: Specialist, multi-disciplinary advice is essential to avoid costly errors and unsustainable revenue commitments.
• Innovative structures can unlock significant savings: With total spending on temporary accommodation by English councils now in the £billions, the case for investment almost always stacks up.
• Private capital is available, but needs public subsidy to bridge the viability gap: Institutional investors are willing partners where the structure is right.
• Push for greater transparency and tangible support from central government: Councils are solving the same problems, independently. A government-backed taskforce is needed to deliver standardised approaches, centralised support, and model procurement packs and legal documents and save time, money, and risk across the sector.
• Don't be afraid to challenge established orthodoxies: Councils must be willing to test new models, challenge established orthodoxies and advocate for change.