London’s councils are engaged in a constant game of real life Monopoly as they compete on the open market to buy up property or secure private rentals to house people in need.
With demand for temporary and permanent homes increasing all the time, councils across the city are desperately searching for affordable ways to ease pressure on their emergency housing costs by getting people out of hotels and bed and breakfasts, and into proper homes.
The tense competition for homes means some councils are reportedly engaged in bidding wars with each other, pushing up the cost of both rentals and sales. But even when not engaged in a direct bidding war – which some councils refuse to take part in – they are often working separately from each other to secure any homes available, including in each other’s back yards.
Brent Council Leader, Cllr Muhammed Butt, said: “Councils buy properties on the open market, they get no special priority and are forced to bid against private buyers who have deeper pockets.”
London’s housing crisis is at a critical point with one in 50 Londoners now homeless and living in temporary accommodation – the highest level ever recorded in the capital.
As a result households are being forced to live far outside the city in ‘temporary’ homes – up to 278 miles away according to a recent MyLondon investigation – and London’s local authorities are now engaged in a push to find more housing closer to their boroughs.
London is ‘epicentre’ of homelessness crisis
The average home in Brent now costs between £385,000 and £400,00 which is leaving Brent Council with funding gaps of hundreds of thousands of pounds when purchasing property. Schemes like the Council Home Acquisition Programme see the Mayor give councils funding of up to £200,000, or £85,000 for discharging homelessness duties, which can leave councils “£300,000 short” in some cases, said Cllr Butt.
He added: “When we go in [to the open market] we are slightly handicapped because we know what we can afford over the next 30-40 years and we can’t go above it. This means that we have a set limit and we can’t really go for it. Others can always outbid us.”
Brent Council uses a wholly owned housing company set up in 2016 called l4B (Investment 4 Brent) to go out and find homes in Brent and further afield which are affordable. These tend to be on the “lower end of the spectrum” and the council then needs to bring them up to standard.
Brent Council then acquires the money and loans this to I4B. But they still have to pay this over 30-60 years in order to make it stack up against the amount of benefits people receive, said Cllr Butt.
Redbridge Council has said that the rising cost of renting temporary accommodation is becoming “unsustainable”, with some people now being place outside of the borough or outside London altogether.
An investigation into temporary accommodation by MyLondon recently revealed a postcode lottery in terms of how far away offers are being made. While some London councils are keeping everyone within 30 miles of their home borough, others are placing people in ‘temporary’ homes over 200 miles away.
The data, revealed through Freedom of Information requests to every local authority in the city, showed that Redbridge had sent one household to live in accommodation 120 miles away in Sandwell in the past five years.
Ealing Council placed one household 278 miles away in Newcastle, the furthest of all London councils to respond to the FOI request. Newham was not far behind, placing a household around 250 miles away in Middlesbrough for eight years.
You can see how your London borough compares in our interactive map below.
Cllr Kam Rai, Leader of Redbridge Council, told MyLondon: “We spent £52m last year on temporary accommodation, which is unsustainable. Rents in London are expensive and rising, which means the gap we need to plug between housing support allowance and the real cost of temporary accommodation is large and increasing. We therefore must support people into more affordable accommodation which can be outside the borough, or outside of London.
“Rather than have no choice but to competitively bid on properties for our most vulnerable, we have been and continue to call on central Government to urgently step in and properly fund local authorities, to enable us to robustly address the housing crisis – one which is being felt acutely in London.”
He added: “All local authorities are desperately trying to house vulnerable people and that can result in fuelling the market which is self defeating. Personally, I would like to see a proper rent cap system and for boroughs to all work together and reduce the amount of public money going into the pockets of landlords.”
With one of the lowest social housing stocks of all London councils, despite building hundreds new homes in the last few years, there is not enough to meet the demand Redbridge is seeing, added Cllr Rai.
London councils are also buying up property in each other’s boroughs. Newham Council recently bought an entire block, and half of another, in Havering, after Havering Council was unable to honour an agreement to buy them off a developer, due to its financial situation.
Private rentals also make up a big part of the competition to secure homes, and it’s particularly in this market that ‘bidding wars’ – where two or more sides are encouraged to keep raising their offers to beat rivals to securing a property – can reportedly break out.
Councillor John Woolf, Executive Member for Homes and Neighbourhoods at Islington Council, says the council has been firm with temporary accommodation providers over its zero tolerance policy for bidding wars.
He told MyLondon: “We’re very clear with our temporary accommodation providers that we will not get into bidding wars for properties. We won’t do it; it wastes time and it wastes money so we stay out of that.”
Even outside of direct bidding wars, though, a lack of cooperation between all of London’s councils is fuelling the issue of local authorities scattering their residents in a variety of different areas.
‘It’s exceptionally difficult to build’
Temporary accommodation generates a deficit of around £5.6 billion in Islington’s budget every year, which would only be bigger if it was involved in bidding wars, says Cllr Woolf. He added: “Our housing situation is desperate, we’ve got 16,500 on the housing register, we’ve seen homeless [numbers] go up by 25%, we’ve got about 1,700 people in temporary accommodation – 1,400 of which are children.
“It’s exceptionally difficult to build given the current economic climate and private rents have soared by 13% in the last 12 months.
“It’s due to the severe shortage of affordable housing in boroughs and in Islington, and unfortunately many families are being placed outside of their boroughs; and from Islington’s perspective that is emphatically not our preferred option and we work really hard to reduce those placements.”
All of London’s councils say they try to keep people in-borough as much as possible but that’s proving virtually impossible. Islington had placed one household 122 miles away in Wolverhampton, according to their response to MyLondon’s FOI.
Right to Buy homes now being bought back by councils
Although it is stretched, Islington Council said it is trying to find new ways of avoiding the high cost of renting temporary accommodation. One of these methods is through buying back ex Right to Buy properties to add to their housing stock – Islington hopes to have bought back 907 of these properties by next year.
Cllr Woolf added: “Despite having painted a somewhat dystopian picture and the situation is desperate, I do remain optimistic we have a Labour government who recognises the importance of building, a Labour Mayor who is on the same page and in Islington we’re committed to doing all we can to maximise genuinely affordable homes in the borough so I hope it ends in a positive place.”
London Councils, which is the collective of London local government, has said it is doing as much as it can to help prevent London from spiralling into becoming an epicentre for bidding wars and competition. It has introduced targets for maximum rates on temporary accommodation to “reduce competition” and it is trying to reduce the number of out-of-borough placements being made.
Cllr Grace Williams, London Councils’ Executive Member for Housing and Regeneration, said: “London is grappling with the most extreme homelessness emergency in the country. More than half of England’s homeless households in temporary accommodation are London families. One in 50 Londoners are currently homeless, including one in 21 children, and London boroughs spend an unsustainable £4 million a day on providing temporary accommodation.
‘We need government to help us turn this around’
“In the face of these massive challenges, boroughs are doing everything we can to support homeless Londoners. This includes boroughs working together to share information and co-ordinate how we secure temporary accommodation for homeless residents. We have set targets for maximum rates we’d pay for temporary accommodation, with the aim of reducing competition between councils.
“The escalating crisis means boroughs are increasingly forced into using the ‘least-worst’ options. We work hard to minimise the number of out-of-London homeless placements – around 12% of placements are outside the capital’s boundaries. We only make these moves when the homeless household has a connection to the placing area or when we have no other choice for keeping a roof over their heads. However, we know the number is going up and that London’s homelessness pressures are impacting other parts of the country.
She added that London is the “epicentre of the national homelessness crisis” and that “ultimately we need national government to provide us with the powers and resources necessary to turn this situation around”.
The Ministry for Housing, Communities and Local Government was contacted for comment.
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