An East London council is predicted to overspend £5.2 million on temporary accommodation as it does not have enough homes to support everyone in the borough.

Newham Council is splurging millions of pounds from its Housing General Fund on temporary accommodation, caused by a surge in homelessness applications and a forecast increase of 10 extra cases per month.

In the year 2022/23, the council is forecast to see a 9 per cent increase in homelessness applications (4,440), compared to the year 2021/22, when the council received 4,083 homelessness applications.

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The council has also seen a reduction in temporary accommodation available, and has had to resort to using commercial accommodation such as hotels, which is more costly. In a quarterly budget monitoring report outlining the overspend, it has admitted that the service “can no longer be contained” due to a “dramatic reduction” in private rented sector properties.

Out of the £5.2 million overspend, £2.39 million is forecast to be spent on demand increases in temporary accommodation, while £1.3 million is forecast to be spent on “expensive” accommodation. The council has tried to look at the “cheapest form” of commercial hotels, but said prices are now increasing to similar figures seen at pre-pandemic levels.

At the end of August 2022, there were 5,792 temporary accommodation cases – of which 3,112 cases were staying in the “more expensive” nightly paid accommodation. Also predicted in the overspend is an additional £2.6 million of net financial pressures across the board.

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Speaking at an overview and scrutiny meeting on Tuesday evening (November 29), Conrad Hall, director of resources at Newham Council, said he doesn’t think there is “anything unexpected” in the council’s overall financial position for the end of the second financial quarter.

However Mr Hall warned: “In the event of some unforeseen calamity and in the event that government didn’t fund that, then clearly there would be a pressure on the council’s reserves. I think eight months into the year that’s a relative unlikely event, but of course one can’t entirely predict that.”