Government seeks views on shifting homelessness grant funding towards prevention

HPG funding, which totalled £440.4m in 2024-25, can be used to meet the cost of temporary accommodation or payments to support households at risk of homelessness.

In 2023-24, local authorities spent 49% of HPG funding on temporary accommodation and 51% on prevention and relief, which includes 29% staffing costs.

“A large proportion of temporary accommodation costs are covered by sources outside of HPG,” MHCLG said.

“We, therefore, do not intend to fully capture temporary accommodation pressures here, at the expense of prevention and relief activity and labour costs, where a greater proportion is funded by HPG.”

The document also proposed a new formula to assess councils’ relative need for HPG funding. Both homelessness prevention and temporary accommodation need will be calculated by demand times cost.

Prevention demand will be measured by an area’s total housing benefit plus Universal Credit claimants. At the same time, the cost of prevention will be calculated through mean rents in the private rented sector alongside a labour cost adjustment.

Temporary accommodation need, by contrast, will be measured by official numbers of people living in such accommodation, while costs will be measured through mean rents in the private rented sector.

This potential change in tack on HPG funding comes after a damning inquiry report from the Public Accounts Committee that chastised the government’s homelessness strategy for being unclear, described Local Housing Allowance rates as having no logic, and called for an affordable homes target.

The consultation closes on 11 March. Allocations for 2026-27 will be calculated and announced in late 2025.

The overall amount of HPG funding will be set at the government’s Spending Review in June.

Separately, the government is overhauling the wider local government finance system and has promised to explore whether and how to consolidate the various homelessness grants.

With the government seeking views from the sector on the HPG, the latest figures show that the social housing waiting list in London has risen to a 10-year high.