London councils pay out £41.5m in ‘incentives’ to private Landlords

Last year the Evening Standard reported on Z2K’s investigation into the growing use of ‘incentives’ by local authorities to secure private rented sector accommodation for homeless households, whether for use as temporary accommodation or to discharge their duty.

We had uncovered this practice through our own Private Rented Sector Access Scheme, where we work to find accommodation for individuals not entitled to statutory help. In a number of instances we had found affordable properties for our clients with Landlords willing to take them, only to be ‘outbid’ by a local authority offering an incentive for the property. Sometimes we would even find ourselves in the midst of a bidding war between two authorities, as each fought to secure the property by offering higher and higher amounts of money. 

We decided to investigate the scale of this practice and submitted freedom of information requests to all London local authorities requesting the amount spent, dating back to 2012/13. The Evening Standard story revealed that almost £30m had been spent by London councils from 2012 to 2016, and that the amount had been increasing each year. For 2016/17 we have found that the trend has continued with over £12m being spent on incentives, a £2m increase on 2015/16. This means that over the past five years £41.5m of public money has gone straight into the pockets of private landlords simply for renting out their properties to paying tenants.

This rise in the use of incentives is inextricably linked with the increasing levels of homelessness since 2010, the impact of welfare reform and the housing crisis generally. The latest homelessness statistics show that there were over 54,000 households in temporary accommodation in London in March 2017, a more than 60% increase on the 2010 low. This immense pressure combined the record low levels of housebuilding and decreasing access to affordable properties has pushed councils to desperate measures to secure accommodation. Another factor is Landlord’s new found reluctance to rent to housing benefit claimants, due to the fear of arrears, likely arising from the impact of the LHA caps and other welfare reforms.

Interestingly the full figures (available here) show a mixed picture. A number of authorities (Barnet, Ealing, Enfield and Lambeth) spent more than £1m on incentives, with Barnet spending the most at £1.6m and Ealing seeing the biggest increase, from 484,000 in 2015/16 to £1.1m in 2016/17. Undoubtedly this reflects the high levels of homelessness in these authorities.

A small number of authorities however saw a significant decrease in spending. Sutton, for example, claim to have only spent £6,000, compared to £423,850 in 2015/16. One possible explanation is that some authorities are placing households in private accommodation without accepting a formal homelessness duty. We often see this in our casework. A homeless household will be approach their local authority to make homelessness application, only to be told that they needn’t  do so as the council can place in the private accommodation, which is probably where they would end up if they made an application anyway. It is possible that significant levels of incentives could be being paid to private landlords in these cases. If so even the high figures we have uncovered could be an underestimate.

As homelessness continues to rise it seems that these incentives have become normalised as part of the process of securing accommodation. We don’t blame authorities for doing what they can to house homeless families but it is undoubtedly a waste of resources that could be better put to use. Perhaps by building more council houses?

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