Spending on homelessness in London has surged by more than 40% in the past year, new analysis shows, with local leaders warning that underfunding could push more boroughs into financial crisis.
Figures from cross-party organisation London Councils reveal that homelessness now costs boroughs £5.5 million per day in 2024-25, compared to £4.2 million spent daily the previous year. The majority of this spending, nearly £5 million each day, is directed towards temporary accommodation – the single largest expense.
London Councils raised concerns over the Government’s Fair Funding Review 2.0, warning that using outdated 2023-24 figures to assess temporary accommodation costs risks “significantly undercounting” the scale of the issue.
The group has also urged adjustments to the Index of Multiple Deprivation (IMD) to ensure homelessness and housing poverty are properly reflected. In addition, they have called for changes to the children’s formula model to account for SEND measures and to correct misjudgements around overcrowded housing.
London Councils predicts that, without reform, more boroughs will be forced to seek Exceptional Financial Support (EFS), with councils already facing an estimated £700 million funding gap over the next three years.
Cllr Claire Holland, Chair of London Councils, said: “After more than a decade of structural underfunding, rising costs and growing demand, it is vital that boroughs receive funding which genuinely reflects the level of need in the capital. We want to work with the government to address our concerns with the Fair Funding Review so that we can help restore stability to council finances and prevent more boroughs being plunged into crisis.”
The warning comes as homelessness pressures intensify across the capital, with London boroughs struggling to meet demand amid rising costs, population pressures and insufficient government support.
