Croydon's nightly paid accommodation costs have risen, according to a recent financial performance report, placing additional strain on the council's Housing Revenue Account (HRA). The average cost per night has increased to £81.32, up from £79.52 in the prior year. This comes amid ongoing increased demand for temporary accommodation, a trend consistent with other London boroughs. Other boroughs facing similar pressures and forecasting overspends in nightly rate accommodation for 2025-26 include Lambeth (£20.0m), Redbridge (£18.3m), Westminster (£13.2m) and Haringey (£11.4m).

The 2025-26 Period 5 Financial Performance Report revealed that the Housing directorate has a General Fund forecast underspend of £0.1m against a net budget of £52.4m. At period 5, the HRA is forecasting a breakeven position, according to the Housing GF and HRA report. However, the rising costs of nightly paid accommodation are a concern.

Several factors contribute to the increased demand and costs. The report notes that the Housing Benefit (HB) subsidy from the Department for Work and Pensions (DWP) for temporary accommodation has been frozen at 90% of the Local Housing Allowance (LHA) since 2011. This creates a significant gap between accommodation costs and HB income. This gap remains significant, and in 2024-25, the subsidy gap was £5.7m for temporary/emergency accommodation and £5.0m for private tenants.

Despite these challenges, the council is actively pursuing strategies to manage the situation. These include:

  • Prevention work to reduce the demand for temporary accommodation.
  • Utilising ringfenced funds such as the Household Support Fund, Rough Sleeping Initiative grants, and asylum seeker & refugee grant funding.
  • Exploring opportunities for property acquisitions, including bulk purchases, funded by Right to Buy (RTB) receipts and other grants. The council is investigating opportunities such as the acquisition of properties including bulk purchases. The acquisitions are funded from the use of Right to Buy (RTB) receipts and, as a result of the change in legislation last year, can also use other grants to part fund acquisitions.

The council acknowledges the risk posed by the ongoing reduction in available private rental properties and supply constraints as landlords exit the market. The 2025-26 Period 5 Financial Performance Report notes that the General Fund revenue budget outturn is forecast to underspend at financial year end by £22.6m, contributing to the target as required by the Stabilisation Plan. This would reduce the necessary level of capitalisation directions from £136m to £113.4m. The 2025-26 budget required capitalisation directions from the government of £136m to balance. Capitalisation directions allow councils to fund revenue expenditure from capital resources.