How Greedy Landlords Are Fuelling a Homelessness Crisis

February 15, 2016 Updated: February 15, 2016

When it comes to homelessness, sleeping rough in a shop doorway is just the start of the problem. From young people living with parents because of unaffordable rents, families sleeping in homeless hostels, or couples teetering on the edge of mortgage arrears, many of the homeless are hidden from sight.

However, rough sleeping figures in London are on the rise. In the 2010, rough sleeper count 415 people were noted as sleeping rough in the capital. In 2014, that number was 742—an increase of 44 percent in the space of four years.

Like rough sleepers, the number of households in temporary accommodation has also been increasing. More than 50,000 households were living in temporary accommodation in London at the end of 2015, an increase from 45,810 on the previous year, and a massive leap from the 35,830 in 2011.

But while the number of households living in temporary accommodation is on the up, the number in “bed and breakfast” (B&B)—a type of accommodation for travelers—is going down. This is primarily because of a change in regulation which means the maximum amount of time a family can live in a B&B for is six weeks.

On the face of it, a decrease in families living in B&Bs long-term sounds like a good thing. But it’s how the private rented market has responded to this regulation that is really causing problems.

Home Truths

The problems start with the way temporary accommodation is paid for. It sits in a complex and shady corner of the housing benefit regulations, where different rules apply.

Local authorities receive a special housing benefit subsidy directly from the government for people in temporary accommodation. This includes a weekly benefit payment based on the “normal” housing benefit plus a management subsidy of 40 pounds (about $58) a week, to contribute to the local authority’s costs in managing that tenancy.

Armed with this money, authorities then have to find landlords with properties they are willing to let, for the funds available. This is particularly tricky, because the weekly benefit payment for temporary accommodation has been frozen since January 2011. So as private sector rents continue to climb, local authorities are increasingly unable to find accommodation that comes within budget.

In the past, local authorities could negotiate for properties on long leases, pushing down the overall cost. Now suppliers are recognizing local authorities are quite desperate to move households out of B&Bs as the six-week limit approaches, and are beginning to charge much higher nightly rates. Which are often well above the housing benefit subsidy.

This is major business in London. In 2014, expenditure on temporary accommodation reached over 663 million pounds (about $957 million). A quarter of that cost was met by local authorities themselves, topping up the shortfall between the housing benefit subsidy and the rents being charged. The “management fee” component is also being used to meet rent costs, with around 170 million pounds (about $245.4 million) of temporary accommodation costs being met by local authorities themselves.

But of course, knowing more about the costs of temporary accommodation in London does not make it any less miserable for families waiting—often for years—to be offered a house they can afford to live in. It does however question the supposed savings being delivered by housing benefit cuts. Cutting housing benefit subsidy has not contained the cost of temporary accommodation. It has simply shifted the unmet cost from central to local government.

Julie Rugg is a senior research fellow at the University of York in the U.K. This article was originally published on The Conversation.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.