An east London borough has warned it is hurtling towards bankruptcy over spiralling homelessness and private rental costs.
Newham town hall is facing “considerable financial pressures” because of its temporary accommodation bill for homeless families and without support it “could face an unprecedented budget gap of £175 million” by 2026.
The council is forecasting a £40million overspend in this financial year, on top of the £22 million in 2023, because of the rising costs of rents.
The borough is supporting around 6,500 families in temporary accommodation and has more than 38,000 households on its social housing waiting list.
In the 12 months to April it saw 6,685 homelessness applications — up 26 per cent on the previous year. The town hall blamed the “high reliance” on the private-rental sector with a diminishing number of properties, a 35 per cent fall in council housing stock and benefits not keeping up with inflation.
It added that its temporary accommodation bill was the sole reason for the overspend and without it the budget would be balanced.
Zulfiqar Ali, cabinet member for finance, warned that the borough may need to sell off assets and access the Government’s Exceptional Financial Support scheme, which enables them to borrow to fund day-to-day costs.
It has been used by 20 local authorities, including bankrupt Croydon and Woking councils. Havering and Lambeth have also been granted access.
In a forward to Newham’s Finance Review Report, due to be discussed by councillors next week, Mr Ali said: "For Newham, this will not be because we have failed in our financial management approach; rather past government policy and the inefficacies of the housing market in London and the UK has failed us."
Analysis by London Councils shows the capital’s town halls now collectively spend £90million a month on temporary accommodation - up by almost 40 per cent on last year. One in 50 people in the capital are homeless, the umbrella group found.
It comes as the new Labour government has promised a generation of new towns to “kickstart economic growth and get Britain building again”.
She said London’s housing had been at the centre of a “political game” under the previous government and the capital would be given the “realistic target” of building 80,000 new homes a year.
“Our new towns will deliver housing fit for the future, shaping new communities with real character that people can be proud to call home,” she said on Thursday as she announced the set up of the New Towns Taskforce led by housing expert Sir Michael Lyons.
“With Sir Michael in the driving seat, I know his Taskforce will work together with local people to help us decide on the right places for these new towns, delivering more homes, jobs and green spaces.”
Mayor of Newham Rokhsana Fiaz welcomed the pledge but added: “After 14 years of soaring rents and housing insecurity in London, homelessness in Newham is increasing and costs of temporary accommodation are spiralling.
“We can’t simply build our way out of this housing crisis.”
Former Chancellor Philip Hammond also warned that a housebuilding boom is unlikely to happen without an increase in foreign labour.
He told Sky News: “ You can’t build houses without builders. If the government thinks relaxing the planning rules while tightening the migration rules is going to get houses built they have another thing coming.”
