The District Councils’ Network (DCN) is a cross-party network of 164 district councils and five unitary councils. We are a special interest group of the Local Government Association, providing a single voice for district services.

DCN member councils deliver a wide range of local government services to over 21 million people – 38% of England’s population. They cover 60% of the country by area.

Over 91,000 households were owed a prevention and relief duty in the year to September 2024 by DCN councils. The homelessness crisis is no longer confined to London and Metropolitan areas. While London Boroughs still have the highest absolute numbers in temporary accommodation, district areas are experiencing a faster percentage growth in TA use, demonstrating how this challenge is rapidly expanding beyond traditional urban centres.

The number of households in temporary accommodation were 49% higher in September 2024 compared to 2021. For households with children, figures have grown by 70% in the same period. This rapid growth is creating an unsustainable financial burden, with some councils now spending over a quarter of their council tax income on homelessness services.

District councils are at the forefront of tackling homelessness, with responsibility for housing and homelessness services across their communities. Our members have statutory duties to prevent and relieve homelessness, provide temporary accommodation, and support vulnerable residents.

Question 1: Do you agree with the proposal to use ‘total Housing Benefit (HB) + Universal Credit (UC) claimants’ as a measure of homelessness demand?

No

We oppose using ‘total Housing Benefit and Universal Credit claimants’ as the primary measure of homelessness demand. This metric fails to capture the true nature of homelessness pressures facing district councils.

The proposed formula misses crucial cohorts who are vulnerable to homelessness but may not be claiming benefits. Young people, rough sleepers, and those who are sofa surfing but not claiming UC would be overlooked. The current formula’s focus on actual prevention and relief duties provides a more accurate picture of real demand.

We are also concerned that the formula fails to capture homelessness pressures from asylum seekers receiving positive decisions and households in resettlement schemes. These individuals aren’t represented in HB/UC claimant figures until after they present as homeless, creating disproportionate pressures on certain district councils with higher asylum accommodation numbers or resettlement scheme participation.

Several of our members in high-value housing areas have highlighted that their communities experience significant homelessness challenges despite having relatively low numbers of benefit claimants. The extreme housing costs in these areas create homelessness risks for working households with incomes above benefit thresholds. Many households presenting as homeless have never claimed benefits but face housing crises due to relationship breakdown, the end of private tenancies, or other life events. Under the proposed formula, these high-pressure areas would receive less funding despite their substantial need.

The drive for simplicity in the formula to the extent of using a single metric will significantly underestimate the true demands on councils for prevention and relief services. Alongside HB & UC claimants, government should also use the prevention and relief data it already publishes to ensure true demand for prevention services are reflected at a local authority level. There are two key measures which should be considered:

• The proportion of prevention/relief duties which end with councils securing PRS accommodation for that household. This represents the significant effort and time which councils put into preventing individual households from living in TA. These cases, and the demand on finite resources, are currently not reflected at all in the proposed formula.
• The number of households owed a prevention or relief duty who are in full time work and not in receipt of benefits. This is necessary to reflect the true demand on homelessness services in DCN and high-cost areas. In these areas, demand for support significantly outstrips the number of households receiving housing benefit or universal credit.

Question 2: Do you agree with the proposal to use ‘TA Numbers’ as a measure of TA demand?

Indifferent

While we are broadly supportive of using TA numbers as a measure of demand, we believe this metric alone doesn’t capture the full picture of how councils manage homelessness pressures.

To create a more balanced formula, we recommend also including the percentage of prevention and relief duties which end with securing private rented sector accommodation. This would properly account for successful prevention work that directly reduces the need for temporary accommodation placement.

We are concerned that using only TA numbers could create counterproductive incentives. As Exeter City Council points out, it “penalises authorities from working proactively to reduce length of time people are in TA and does not consider numbers of households where it is prevented.” Without acknowledging prevention outcomes, the formula risks rewarding higher TA numbers rather than successful prevention work.

Oxford City Council notes that “having 45-50% of the grant determined by TA costs reduces incentive to lower TA use when possible. A council that is focused on prevention and making major progress to lower TA use year on year will be penalised with cuts in HPG each year.” This appears to conflict with the government’s stated aim of reducing temporary accommodation use.

To truly support government’s prevention agenda, the formula should strengthen the prevention side by incorporating metrics that reward councils for keeping households out of temporary accommodation altogether through successful interventions in the private rented sector.

Question 3: Do you agree with the proposal to use ‘mean rents in the PRS’ as a measure of homelessness costs?

No.

We believe that using mean private rented sector rents as a proxy for homelessness costs is flawed for several reasons.

While moving from lower quartile to mean rents may better reflect market reality, basing calculations on two-bed rents does not reflect the diverse accommodation needs across our membership. Many of our members report significant pressures on one-bed properties and larger family accommodation.

A significant concern is the removal of the old formula’s inclusion of ‘prevention and relief into the PRS’ to help determine homelessness costs. This previous measure effectively acknowledged the difficulty that urban areas face due to expensive rental markets.

Local market conditions and affordability vary dramatically across district areas. In Hastings, for example, just 1% of properties are affordable within Local Housing Allowance benefit rates. Similar acute affordability crises exist in many district council areas, yet the proposed formula would significantly reduce funding to these places.

The formula assumes both availability and affordability of accommodation at mean rent levels. In practice, many districts have no properties available at these theoretical mean levels, forcing councils to use more expensive accommodation options. Additionally, the costs associated with securing accommodation for homeless households often exceed standard PRS rates due to additional fees, deposits, and support costs.

Overall, we believe the proposed measure oversimplifies the complex housing market conditions that drive homelessness costs and fails to account for the significant variations in local housing markets across district council areas.

Question 4: Do you agree with the proposal to use the ‘labour cost adjustment’ as a measure of homelessness costs?

No

While labour costs are a significant factor in delivering homelessness services, the proposed approach has several shortcomings.

Many of our member councils prefer the Area Cost Adjustment (ACA) over the Labor Cost Adjustment (LCA) as the ACA factors in property prices and travel times, both of which provide a better picture of extra costs on local authorities.

The Labour Cost Adjustment is not explained in detail in the consultation, with no information about what this is derived from, making it difficult to understand and assess its potential impact.

We question whether this adjustment considers that areas with higher wages are typically areas that are more costly to live in. This adjustment may disadvantage those areas that are less affordable to live in.

Without clear understanding of how this metric works, it’s difficult to assess its appropriateness or potential impact on homelessness funding.

Question 6: Do you agree with the proposal to use ‘mean rents in the PRS’ as a measure of TA costs?

No

This proposal misunderstands the reality of temporary accommodation costs for our member councils.

Mean rents do not capture the significant variations in cost between emergency, one-off bookings of accommodation versus longer-term, pre-negotiated arrangements. They also do not include cost of managing accommodation, utilities, or void costs.

The disconnect between PRS rents and true TA costs is particularly acute for district councils, where 49% of households in temporary accommodation are placed in expensive nightly paid accommodation. This represents a substantial cost pressure that mean PRS rents simply do not reflect.

The cost of temporary accommodation is higher than rent levels in the PRS for multiple reasons. Bills such as council tax and utilities are inclusive, unlike in the PRS. TA is often procured on a nightly paid basis from private landlords, leading to costs far above standard market rents.

Using mean PRS rents would not consider the property sizes needed to accommodate those in TA, the need for specialist TA, or the cost of TA locally which is often far higher than PRS rents. Many of our members believe the current use of 3-year average spend on TA is more appropriate and suitable for measuring TA costs.

A critical issue that the consultation fails to address is the substantial gap between Housing Benefit subsidy (frozen at 90% of 2011 LHA rates) and actual TA costs. DCN research has found that the subsidy only covers approximately 38% of the actual cost of providing temporary accommodation, with councils using HPG to bridge this gap.

The new funding formula would be particularly damaging for councils that have to rely mostly on private temporary accommodation. These councils face much higher costs than those with their own housing stock – with some now spending over a quarter of their council tax income on homelessness services. In Hastings, a council without their own housing stock, this figure reaches 58%, with council spending rising from £730,000 to £6.5 million annually in the past five years.

Proceeding with the formula as suggested would lead to councils with high numbers of households in council or housing association owned TA being overcompensated. In this circumstance, full costs can be claimed through the Housing Benefit system. It would be appropriate for government to apply a deflator to this part of the formula, where councils have a high proportion of households in this type of temporary accommodation. This would ensure that funding is directed to those areas bearing the highest costs locally.

Question 8: Do you agree with the proposal to use RO4 (Revenue Outturn tables on TA spend) to approximate TA numbers where there is no TA data available for the given year?

Yes

This is a reasonable approach for the small number of authorities where data might be missing. This is only applicable to the local authorities who are not returning consistent data to MHCLG.

We recommend that MHCLG continue to improve data collection methods and provide support to ensure all local authorities can submit accurate and timely information.

Question 9: What do you think is an appropriate split of HPG funding between temporary accommodation and prevention and relief?

Other

We believe that the split between temporary accommodation and prevention and relief should not be rigidly prescribed. Each local housing authority should continue to determine how to spend its HPG funding based on local circumstances and challenges.

A predetermined split would be particularly unfair to councils without their own housing stock who face significantly higher TA costs, as they must rely entirely on private sector accommodation at market rates (which is subject to the subsidy cap). These differences in housing create fundamentally different cost bases that a standardised percentage cannot address.

The underlying issue remains that many councils are forced to use HPG funding to cover the substantial gap between Housing Benefit subsidy (frozen at 90% of 2011 LHA rates) and actual TA costs. While our members would prefer to use this funding for prevention work, they have no choice given the significant subsidy shortfall.

Rather than imposing a fixed split, government should address the root cause by updating the TA subsidy rate, which would naturally allow more HPG funding to be directed toward prevention and relief as originally intended. Until government does this, we do not support any split and push for continued flexibility.

Question 10: Should there be a phased approach to implementing a change in weighting? For example, implement a partial change in weighting in year 1 and the full change in year 2.

Yes

Any significant changes to funding allocations should be phased in to allow councils to adjust their services and avoid disruption to vulnerable residents. Our members support a phased approach to implementing changes in weighting.

Many district councils have structured their homelessness services around current funding levels, and with some authorities facing potential cuts of up to 39%, abrupt changes would jeopardise critical support for those at risk of homelessness. A gradual implementation provides essential time for service planning and adaptation, should the proposed changes go ahead.

Question 11: If prevention and relief spend represented 55% of overall HPG funding, what do you think is an appropriate split between labour and rent costs?

Other

We do not believe it is appropriate to rigidly prescribe how prevention and relief funding should be split between labour and rent costs. Each local authority has been able to determine how it feels is most appropriate to spend its HPG funding, and we would welcome this to continue.

It makes little sense for MHCLG to prescribe specific spend on rent and labour. To impose such controls would go against government policy intention which is to decentralise decision making and control on spend.

Different areas face different cost pressures and have different approaches to preventing homelessness. Imposing a one-size-fits-all split would limit councils’ ability to deliver effective, local services tailored to their communities.

Question 12: Do you agree with the proposal to use transitional arrangements to mitigate changes in funding allocations?

Yes

Transitional arrangements are essential to avoid drastic funding reductions that could jeopardise vital homelessness services.

Our analysis shows that under the proposed formula, councils including Huntingdonshire (-39%), Exeter (-38%), Gloucester (-37%), Oxford (-36%), Broxbourne (-36%), Hastings (-34%), Arun (-33%), Mid Sussex (-31%), Welwyn Hatfield (-27%), and Tendring (-26%) would face major reductions in their homelessness prevention funding.

Transitional arrangements reduce the cliff edge scenario and allow the transition to be as smooth as possible. This is particularly important for smaller district councils, which often have more limited financial reserves to absorb sudden funding changes.

Most importantly, we would strongly encourage the department to reconsider the proposed formula itself, rather than simply mitigating its effects. Councils with high homelessness pressures should not lose critical funding for prevention and temporary accommodation costs. Without addressing the flaws in the formula, transitional arrangements merely delay financial distress for smaller councils already operating under significant budgetary constraints.

Question 13: Do you agree with the proposal to use transitional arrangements in line with the caps used in the previous formula (2% in the first year and 5% in the second)?

No – the % caps should be lower

The proposed 2% and 5% caps are insufficient to protect services in councils facing substantial funding reductions. While many of our members have accepted the proposed caps, some have expressed concerns that these levels would still create significant financial pressures.

With some district councils facing potential funding cuts of up to 39%, the proposed caps would result in substantial annual reductions. For example, Oxford City Council would lose £776,708 – 36% of its funding, while Hastings Borough Council faces losing £754,000 – 34% of its grant.

The impact of different cap levels is significant. With 5% annual reductions, councils like Oxford and Hastings would lose over £100,000 per year in vital homelessness funding. By contrast, a 2% cap would limit annual reductions to approximately £43,000, giving these authorities more time to adapt while maintaining essential services.

We believe that caps should be no more than 2% per year to provide stability for homelessness services and give authorities adequate time to adjust their service provision.

Question 14: If you answered Q13 with “the % caps should be lower – what % range would you prefer?

Up to 2%

We believe that caps should be no more than 2% per year. This would provide significantly better protection than the proposed 5% cap in the second year.

For authorities facing the largest proportional cuts, a 2% cap would mean annual funding reductions of approximately £43,000-£44,000, rather than over £100,000 under a 5% cap. This difference is particularly important for smaller district councils with limited financial reserves that still need to maintain essential homelessness services.

Question 16: Do you agree with the proposal for transitional arrangements to be tapered between financial years?

No – the % caps should be the same in all years

While our members have expressed different views on tapering, we believe consistent caps across years would provide greater certainty for financial planning.

New Forest District Council notes that consistent caps “enable better planning of resources in the longer term.” This predictability is particularly valuable for smaller district councils with limited financial flexibility.

With the scale of potential funding reductions facing some authorities – up to 39% in some cases – a consistent, lower cap provides more appropriate protection than a tapered approach. Tapering would mean that councils already under severe pressure would face increasingly difficult financial challenges each year, potentially compromising essential homelessness services.