South East council on brink of bankruptcy over ‘massive’ rise in homelessness costs

In a recent response, Hastings Borough Council has accepted all of the LGA’s 13 recommendations and promised to urgently reduce spending, review all its spending budgets and prioritise financial stability.

Achieving this will require further difficult decisions, the council said, and it is likely that more services will need to be scaled back or paused until the council is on a strong financial footing again.

Earlier this month, the council approved plans to sell off four assets to raise up to £3m, potentially using the money to transform its housing and temporary accommodation services.

A financial monitoring report going before the council’s cabinet next week (4 September) explains that additional staff were recruited in July with the purpose of reducing the number of people in temporary accommodation and it was seeing the first “tentative signs” of a reduction.

However the council is still forecasting an overspend of £697,790 due to an increase in provider costs.

Hastings, which is one of the poorest towns in the South of England, does not have its own housing stock – meaning it has been forced to use expensive nightly accommodation from the private sector.

To address this, the council has approved plans to spend £11m acquiring properties to house people experiencing homelessness, and is also building its own hotel, which will be leased to Premier Inn. 

Next week’s cabinet will also be asked to approve a plan to increase the capital programme budget for the 80-bed hotel in the town centre to £13.6m after the tender price exceeded the original estimate.

However, the LGA report raised concerns about the hotel project, and said there had been “limited scrutiny” over the council’s initial decision to enter into a contract for the scheme. It warned that the new hotel could lead to losses in the short term, while buying up homes could add pressure to the capital financing budget.

“Whilst purchasing property will create capacity, this will not be enough to combat the housing overspend. A more holistic approach is needed with the focus on addressing costs and the overspend, by managing demand and preventing homelessness,” the report said.

The LGA also said that the council had been “slow to respond” to opportunities for collaboration, and that the East Sussex Procurement Hub could help it to achieve better value for money for temporary accommodation.

Using this hub could also replace more expensive options such as spot purchase of accommodation, the report said.

Writing in the Hastings Observer earlier this month, council leader Paul Barnett said that the town’s problems were part of the national housing crisis and that changes in the housing market meant more and more homeless residents were being placed outside the town.

Mr Barnett accused the government of “dragging its feet” by refusing to increase the Local Housing Allowance and failing to introduce rent controls or end Section 21 ‘no fault’ evictions. 

“They have even removed housing targets from local authorities, so fewer than ever affordable homes are being built nationally,” he said.

Inside Housing’s new Build Social campaign is calling on all political parties to commit to meeting targets for social rented homes in their manifestos for 2024. 

The council was approached for comment.