Funding arrangements for the Homelessness Prevention Grant from 2026/27 onwards

Question 1

Scope of the consultation

Accepted Answer

Topic of this consultation:

This consultation seeks views on the approach to the funding arrangements for the Homelessness Prevention Grant for 2026/27 onwards.

It covers the following areas:

The case for change
Overview of the consultation
Proposed metrics for the new formula
Approach to missing data
Funding proportions
Transitional arrangements

Scope of this consultation:

This consultation seeks views on the approach to the Homelessness Prevention Grant provided to all local housing authorities in England, with the aim of determining a new formula to reflect relative demand and cost pressures. This applies to 2026/27 onwards, with allocations calculated and announced in late 2025.

Geographical scope:

These proposals relate to England only.

Impact assessment:

No impact assessment is required for this consultation.

Question 2

Basic information

Accepted Answer

Body/bodies responsible for the consultation:

Homelessness and Rough Sleeping Directorate within the Ministry of Housing, Communities and Local Government

Duration:

This consultation will last for 6 weeks from 28 January 2025 to 11 March 2025. All responses should be received no later than 11.45pm on 11 March 2025.

Enquiries:

For any enquiries about the consultation please contact the Homelessness and Rough Sleeping team: Homelessnesspolicy@communities.gov.uk.

How to respond:

Consultation responses should be submitted by online survey.

The online survey will allow you to save a draft response and return to the survey at a later time. You may also submit additional information or evidence to support your response to this consultation. Further advice on how to use these features is available on the home page of the online survey.

Alternatively, responses, as well as any further information or evidence may be provided by email to: Homelessnesspolicy@communities.gov.uk.

Written responses may also be sent to:

Homelessness and Rough Sleeping Team
Ministry of Housing, Communities and Local Government
2nd floor, Fry Building
2 Marsham Street
London
SW1P 4DF

When replying to this survey please confirm whether you are replying as an individual or submitting an official response on behalf of an organisation and include:

your name
your position (if applicable)
the name of organisation (if applicable)

Question 3

1.  The case for change

Accepted Answer

1.1. In recent years homelessness has increased rapidly. In June 2024 there were 123,100 households and 159,380 children in temporary accommodation – both the highest number on record. Homelessness levels are far too high. This can have devastating impact on those affected. We must address this and deliver long-term solutions.

1.2. Our missions – growing the economy, an NHS fit for the future, safer streets, opportunity for all, and making Britain a clean energy superpower – are part of a decade of national renewal, built on the foundations of a stable economy, secure borders and national security. By kickstarting economic growth, we will drive up productivity, prosperity and living standards across the UK, including building 1.5 million homes in England over this Parliament. Our action on affordability and poverty will break down barriers to opportunity and build family security – ensuring every child has a safe loving home.

1.3 We have already taken action to deliver on our missions and tackle the root causes of homelessness. A £500 million boost in funding for the Affordable Homes Programme and a new 5-year social housing rent settlement that gives the sector long-term funding certainty to invest in new homes will help to deliver the biggest increase in social and affordable housebuilding in a generation. Through the Renters’ Rights Bill, we will abolish Section 21 ‘no fault’ evictions, preventing private renters being exploited and discriminated against, and empowering people to challenge unreasonable rent increases.

1.4 We are also supporting councils to deliver homelessness and rough sleeping services. In the Autumn Budget, we announced that funding for homelessness services is increasing next year by £233 million compared to this year (2024/25). This brings the total spend on homelessness and rough sleeping to nearly £1 billion in 2025/26, a record level of funding.

1.5 This is the first step to meeting our commitment to getting the country back on track to ending homelessness. We will continue to work across government to deliver the long-term solutions we need, including developing a cross-government strategy, which we will publish following the multi-year Spending Review. This includes prioritising long-term funding settlements and ensuring funding is allocated to where it is needed most, enabling councils to prevent and address homelessness.

1.6 Specific grant funding for homelessness has been in place since 2017. This funding has evolved over time and in 2021/22, the Homelessness Prevention Grant (HPG) was introduced. This consultation is seeking views on HPG and the formula that is used to calculate the need for funding. This consultation will consider proposals on the measures and metrics used to ensure need is calculated accurately based on current and relative pressures.

How does homelessness funding currently work?

1.7 Grant funding for homelessness was introduced in 2017/18 with the Flexible Homelessness Support Grant (FHSG), which replaced the Temporary Accommodation Management Fee (TAMF), to give local authorities more flexibility over their spend on homelessness and to support them to invest in prevention. The FHSG was accompanied by New Burdens Funding to support implementation of the Homelessness Reduction Act 2017 (HRA). In 2020/21, the Homelessness Reduction Grant (HRG) was introduced, to enable local authorities to continue meeting the costs of the HRA following the expiry of the original new burdens funding arrangements. In 2021/22, the FHSG and the HRG were combined into the HPG. See diagram in figure 1.1.

Figure 1.1: Homelessness funding: funding streams available to local housing authorities

2017/18 – 2020/21: Homelessness Reduction Act (HRA) New Burdens Funding
2017/18 – 2021/22: Flexible Homelessness Support Grant (FHSG)
2020/21 – 2021/22: Homelessness Reduction Grant (HRG)
2021/22 – 2023/24: 2022 Consultation; Homelessness Prevention Grant (FHSG + HRG+ Uplift)
2023/24 – 2026/27: Current Consultation; Homelessness Prevention Grant (updated funding formula following 2022 consultation)
2026/27 onwards: HPG (new funding formula for 2026/27 onwards)

1.8 The current main homelessness grant, HPG, is provided to all local authorities in England, to support their statutory obligations under the Housing Act 1996 and to help deliver local homelessness and rough sleeping strategies. HPG is just one element of the funding local authorities can access to prevent homelessness, alongside the Local Government Finance Settlement and welfare funding. The diagram below is intended to show how HM Treasury allocates funding to different government departments. A variety of funding streams are then used to fund homelessness at a local level.

Figure 1.2: Homelessness funding: funding streams available to local housing authorities

HM Treasury – MHCLG DEL – Homelessness Prevention Grant (ringfenced ) – Local authority
HM Treasury – Local Govt DEL – Local Government Settlement (non-ringfenced) – Local authority
HM Treasury – DWP DEL – Discretionary Housing Payment (ringfenced, statutory criteria) – Local authority
HM Treasury – DWP AME – Housing Benefit Temporary Accommodation subsidy – Local authority

1.9 The use of these funding streams can overlap at various points - for example, the cost of Temporary Accommodation (TA) can be met through the Local Government Finance Settlement (LGFS) or the HPG, and payments to support vulnerable households with rent arrears can be funded from the HPG, LGFS or via Discretionary Housing Payments (DHP). The purpose of funding provided by the Department for Work and Pensions through DHP is not solely for homelessness, but we are aware that in practice some local authorities use this funding to help prevent homelessness to varying extents. Paragraph 1.15 sets out further information on the department’s plans for reform of the wider local government finance system.

How does the current HPG formula work?

1.10 HPG funding in 2024/25 totalled £440.4 million (including the £109.1 million top-up to help councils address homelessness pressures and support Ukrainians into settled accommodation). A formula is used to work out the proportion of the funding pot that each local authority receives based on relative homelessness demand and cost pressures.

1.11 Following local authority consultation in summer 2022, the HPG formula was updated for 2023/24 and 2024/25 financial years. This update included two key changes: (1) replacing the TAMF variable in the FHSG element of the formula with revenue outturn data on TA spend, and (2) simplifying the formula by combining the £63m HRG and £47m HRA Uplift into a single £110m element. 2023/24 and 2024/25 allocations were based on these changes with transitional arrangements applied. To help manage significant changes in funding because of the new formula: funding increases and decreases compared to the 2022/23 allocation were capped at 2% in 2023/24 and 5% in 2024/25. The funding quantum was also topped-up by £3m in 2023/24 and £7.1m in 2024/25 to mitigate cash losses across local authorities. See the previous consultation: Homelessness Prevention Grant 2023/24 onwards: technical consultation. See the full analysis in the government response to the consultation.

1.12 A full breakdown of the current formula and detail on how it works can be found in Annex A.

Why are we consulting on the HPG formula?

1.13 In 2022, the department launched a consultation into the formula and associated grant conditions for HPG. The purpose of that consultation was to make sure the grant reflected the latest data on homelessness pressures. In the consultation we sought views: on amending metrics and data sets in the formula; introducing multi-year funding and transitional arrangements; and setting new grant conditions for provision of data.

1.14 The previous consultation received over 170 responses – the majority of which were from local authorities. Several changes were consequently made to HPG funding following the consultation. These included: combining the HRG and HRA elements of the formula; applying the Area Cost Adjustment (ACA)^{[footnote 1]} to reflect the difference in the cost of delivering government services across the country; replacing the TAMF element of the formula with 90% of 3-year average TA spend; and expanding the homelessness case acceptance metric to include prevention and relief duties. Changes were also made to grant conditions in relation to data requirements, including local authorities providing spend declarations and penalties for not providing data returns.

1.15 As part of the consultation responses, we received extensive feedback on alternative metrics that could be used in the formula, including:

76% of respondents suggested alternative indicators for TA pressures. Common themes included a greater focus on affordability, access to the private rental sector (PRS) and consideration of the impact of welfare policy and migration policy.
76% of respondents suggested alternative indicators for homelessness pressures. Responses were highly varied but included greater consideration of access to PRS and social housing and various affordability metrics – e.g., more nuanced rental metrics, welfare metrics, deprivation and population incomes.
Only 13% of respondents felt that our proposed data sources accurately reflected homelessness pressures. 43% felt they partially reflected, 34% felt they did not reflect pressures, 10% were undecided.

1.16 There were also calls for a more fundamental review of the formula – and, in the consultation response, the previous government committed to undertake a fuller review. This government agrees that a full review of the formula is needed – taking a bottom-up, first principles approach, looking at different ways in which we can capture and represent homelessness pressures to fairly reflect need in the distribution of funding.

1.17 This consultation builds on the previous consultation responses. We have analysed the suggestions that were provided on alternative metrics, to consider whether they are effective measures of relative homelessness demand and cost pressures that could be used in the HPG formula. Using the information and evidence that was collected through the previous consultation, we have considered how best to reflect the demand and costs of TA, and prevention and relief activity – testing, for example, the impact of access to different types of housing stock, varying and changing rents levels and interactions with affordability and deprivation.

1.18 We have explored a wide variety of different metrics and approaches and have been working with a Reference Group to test our analysis and provide critical challenge on whether it is accurately capturing the realities on the ground. The HPG Review Reference Group was comprised of an independent academic and 15 local authorities representing a cross-section of the different types, tiers and regions in England. This group met 4 times over 4 months in 2024 and provided extensive insight, challenge and feedback on the department’s proposals throughout the development process.

1.19 From 2026-27, MHCLG is planning reform of the wider local government finance system with a consultation currently open on the principles and objectives that underpin these changes. This will include an updated assessment of local authorities’ need and their available resources. In addition to reforming how we distribute funding, the government has committed to simplifying the wider local funding landscape, reducing the number of individual grants and consolidating them into the Local Government Finance Settlement where possible. This will provide local authorities with more flexibility to meet the needs of local people, and to decide how best to deliver on our national priorities.

1.20 As part of these reforms, we will explore options for aligning HPG funding with rough sleeping funding and consider whether and how to consolidate homelessness grant funding into the Local Government Finance Settlement. The government is committed to resetting the relationship with local government and providing greater freedoms. We are considering how to deliver this consolidation in a way that ensures homelessness pressures are addressed and supports government’s commitment to getting back on track to ending homelessness, alongside meeting these wider ambitions.

1.21 This consultation is focussed on the assessment of need for homelessness funding, taking account of homelessness and temporary accommodation demand and costs. This consultation makes no assumption about the source of the funding or the delivery mechanism.

What is this consultation seeking views on?

1.22 This consultation is seeking your views on the alternative metrics we have identified as effective measures of relative homelessness pressures and that we propose using in the new HPG formula.

1.23 This consultation is reviewing the formula that assesses the relative need for funding, rather than the overall amount of funding available for HPG. The amount of HPG funding is subject to the outcome of the multi-year Spending Review, which will take place in June 2025.

Rough sleeping

1.24 From 2025/26, we are consolidating our main rough sleeping and single homelessness focused grants (Rough Sleeping Initiative, which includes Housing First funding, and Accommodation for Ex Offenders) into a single Rough Sleeping Prevention and Recovery grant outside of the Settlement, to run alongside our Homelessness Prevention Grant (HPG). We have also moved from extensive bidding processes to direct allocation of funding for this grant. From 2026/27, our intention is to continue to directly allocate funding and to further consolidate our main rough sleeping grants with HPG.

1.25 MHCLG is engaging separately, with a smaller targeted group of local authorities, to consider options for how to allocate funding for rough sleeping alongside HPG from 2026/27.

Question 4

2. Overview  of the consultation

Accepted Answer

2.1. This consultation is seeking input from local authorities and other interested stakeholders on a new Homelessness Prevention Grant (HPG) formula to calculate relative need for of funding (as opposed to the overall level of funding available), including seeking views on:

Metrics in the formula: the proposed metrics to capture relative demand and costs of homelessness pressures. This includes measures of prevention and relief activity demand, TA demand, prevention and relief activity costs and TA costs.
Approach to missing data: where relevant, how we calculate allocations where data points may be missing.
Funding proportions: the proposed proportion of the HPG funding pot that is allocated to the different metrics in the formula.
Transitional arrangements: the approach to managing changes in local authority funding allocations as a result of changes to the formula.

2.2. The aims of this consultation are to develop a formula that:

Reflects relative homelessness costs: making sure the formula accurately reflects factors that contribute to homelessness costs and the relative expense across different areas (e.g., capturing that it may cost more to provide TA and homelessness services in one area compared to another).
Fairly reflects demand: making the calculation of funding need reflects demand across England. Demand captures both existing homelessness pressures, for example numbers in TA, and new pressures, e.g., people making homelessness applications and associated prevention/relief activity.
Avoids unintended consequences: making sure the formula does not inadvertently create any unintended consequences e.g., a system and culture that incentivises the use of TA at the expense of prevention activity.
Is future proof for the long term: making sure the formula is agile and can be responsive to changes in local conditions national policy. This requires also balancing the need for funding certainty by avoiding overly volatile metrics in the formula.

2.3 To meet these objectives, we propose the creation of a new HPG formula that separates out the individual elements of the formula into two distinct parts – one for TA pressures and another for prevention and relief pressures as outlined in figure 2.1.

Figure 2.1: Proposed structure of new formula

Homelessness Prevention Grant (Fixed Quantum of Funding)

Temporary Accommodation: Demand x Cost
Homelessness Prevention and Relief: Demand x Cost

2.4 This new formula set-up will help simplify the funding structure and resolve the current overlap between TA and prevention and relief funding – helping to increase transparency of the formula and improve its responsiveness to future changes. As per paragraphs 1.24 and 1.25, separately we are developing an allocations formula for rough sleeping services to sit alongside funding for Temporary Accommodation and Homelessness Prevention and Relief.

2.5. Section 3: Proposed metrics for the new formula: Following extensive analysis and engagement, including with the local authority reference group, we propose using the following metrics in the new HPG formula to ensure that measures are most reflective of relative homelessness pressures.

Homelessness demand: Our proposal is to measure this through ‘total Housing Benefit + Universal Credit claimants’.
TA demand: Our proposal is to measure this through ‘TA numbers’.
Homelessness costs: Our proposal is to measure this through ‘mean rents in the PRS’ alongside a ‘labour cost adjustment’ (LCA).
TA costs: Our proposal is to measure this through ‘mean rents in the PRS’.

2.6 Section 4: Approach to missing data: As part of this new formula, we will need to establish an approach to missing data in case data on certain metrics is unavailable. Following the 2022 consultation, the approach adopted for missing data was to apply the relevant local authorities share of historic TA spend to national estimates of the metric where data was missing. Based on our proposed new metrics in section 3, the only metric that requires an approach to missing data is TA numbers. Our proposal is to use an average of available recent data points for TA numbers, and where no data is available, to continue with the current approach of predicting TA numbers using H-CLIC London and national figures and TA spend shares. (see section 4 for further explanation)

2.7 Section 5: Funding proportions: To reduce complexity, increase transparency and future-proof the formula, we propose separating out the individual elements of the formula into two distinct parts for (i) TA pressures and (ii) prevention and relief pressures. In doing this, we also propose reconsidering the proportion of the overall HPG funding pot that is allocated to the different parts of the formula. The consultation seeks views on options for how we might split the HPG funding pot between TA pressures and prevention and relief – for example a 50/50 split, a 45% TA and 55% prevention or other proportions.

2.8 Section 6: Transitional arrangements: The previous consultation concluded that transitional arrangements were important to provide stability to local services and mitigate significant financial decreases. Therefore, a cap was introduced on funding increases and decreases at the rate of 2% in 2023/24 and 5% in 2024/25. From our engagement with local authorities, there was general support for implementing transitional arrangements as a principle – noting the importance for local authorities to know how long transitions would last and making sure those due to gain would do so as soon as possible. Our proposal is therefore to implement new transitional arrangements to mitigate significant changes to HPG funding received by a local authority and we are seeking views on the scale of any cap.

2.9 This consultation is open for responses from 28 January to 11 March 2025. We will publish our consultation response alongside the allocations in late 2025. We are grateful for your views on the above proposals which will help government to take an informed decision on the funding distribution model for future allocations.

2.10 This consultation is reviewing the formula that reflects the relative need for homelessness funding, rather than the overall level of funding available for HPG. If the total amount of funding remains the same as in the previous year, changes to the formula will lead to changes in individual local authority funding allocations – with some local authorities seeing increases and others seeing decreases in funding. The amount of HPG funding available is subject to decisions to be taken at the multi-year Spending Review the outcome of which will be finalised in June 2025.

2.11 To help visualise and consider our proposed changes, we have shared illustrative allocations that are based on a hypothetical funding pot. These do not account for any adjustments for available resources, which government is considering as part of wider reforms to local government funding (see Section 1). They are also highly likely to change when the calculations are re-run using the latest available data when allocations are finalised. These should not be considered as representative figures for future allocations.

Question 5

3.  Proposed metrics for the new formula

Accepted Answer

This section is broken into four parts: homelessness demand, TA demand, homelessness costs and TA costs – setting out for each area proposed metrics to capture these pressures.

Homelessness demand

3.1 In the current formula, homelessness demand is broadly measured through a combination of ‘Housing Benefit claimants’, ‘single adult households owed a prevention or relief duty’ and ‘the sum of prevention and relief duties owed + prevention into the PRS + relief into the PRS’.

3.2 The current approach uses H-CLIC data to look at the sum of all households that have approached a local authority at risk of, or currently, homeless as the main measure of demand. Data on benefit claimants is used in the current formula to allocate funding to areas which have larger vulnerable populations, as people in receipt of benefits are more likely to be at risk of homelessness than those who are not.

3.3. In the previous 2022 consultation, there was feedback about how affordability, availability and access to different types of housing stock, and deprivation and welfare levels all have an impact on homelessness demand and should be considered as alternative metrics in the formula. There has also been feedback that allocating on ‘duties owed,’ may inadvertently weight funding towards local authorities that have greater resource and capacity to respond to cases at the expense of local authorities with significant and overwhelming demand.

3.4 As part of our policy and analysis for this review, we explored a broad range of different metrics, to test which indicators most effectively capture homelessness (prevention and relief) demand pressures. This included testing different rent metrics (such as rent increases and proportion of income spent on rent), different deprivation measures (such as the index for multiple deprivation and children in low-income households) and different welfare indicators (such as benefit claimants and impact of local housing allowance).

3.5 Based on our testing, welfare indicators, specifically total number of Housing Benefit (HB) and Universal Credit (UC) claimants, correlate strongly with homelessness levels and measures of deprivation. We tested whether HB/UC claimants in the PRS alone was a better predictor of homelessness pressures, given that those in this tenure are the most vulnerable to housing insecurity. However, we found that all HB/UC claimants has a stronger correlation with wider measures of deprivation and therefore, homelessness pressures. Whilst other factors such as affordability, housing stock and rent metrics are drivers of homelessness, our analysis at this stage suggests that allocating funding on such metrics may not allocate funding to areas where need is greatest. This is because there are many other intertwining factors and effects driving these levels, which can have the opposite effects on levels of homelessness e.g., rent increases can be a driver of homelessness, but can also be an indicator of growing affluence in an area, which is often associated with lower homelessness demand.

3.6 Therefore, in our new formula, we propose using ‘total Housing Benefit (HB) + Universal Credit (UC) claimants’ to capture homelessness demand. Our proposal is to use an average over the last available 12 months of data from DWP published caseload records, to ensure allocations are reflective of the most recent pressures and not based on a single snapshot. in time.

3.7 Using HB/UC instead of H-CLIC data on ‘homelessness duties owed’ improves the consistency, objectivity, simplicity and data quality of metrics in the formula. Overall our analysis has shown HB/UC to be a strong indicator of homelessness demand – reflecting both homelessness cases and wider deprivation (a determinant of those at risk of homelessness).

Question 1: Do you agree with the proposal to use ‘total Housing Benefit (HB) + Universal Credit (UC) claimants’ as a measure of homelessness demand?

Yes
No
Indifferent
If you have answered ‘no’ or ‘indifferent’, you are welcome to provide further comment on your reasoning and/or an alternative approach [free text box]

TA demand

3.8 In the current formula, this is broadly measured by ‘90% of 3-year average historic spend on TA’. This metric aims to allocate funding to areas that have had current and historic high levels of TA.

3.9 In response to the 2022 consultation, there was a broad consensus that TA demand needs to be reflected in the Homelessness Prevention Grant (HPG) formula. However, concerns were raised that historic TA spend may not reflect current pressures.

3.10 As part of our testing, we looked at several TA metrics to see which most effectively captured current demand, including TA numbers, types of TA, and TA numbers weighted by length of stay. We also tested the extent to which TA numbers are a predictor of future TA levels. TA ‘numbers’ refers to the number of households rather than individuals.

3.11 From our testing, we found that TA numbers have a strong correlation with historic TA spend. Likewise, historic TA numbers were also found to highly correlate with current TA numbers, indicating it is therefore a good approximation of TA demand. There were concerns during policy development with the refence group that a measure of households in TA would not account for the average length of stay. However, given the H-CLIC metric on TA numbers is a snapshot on a given night, this number will already account for length of stay, as it will be higher when the average length of stay is longer because families will move through the system at a slower rate. We therefore concluded that an additional adjustment for length of stay was not necessary and would risk double counting.

3.12 Therefore, in our new formula, we propose using ‘TA numbers’ to capture TA demand. Our proposal is to use LA H-CLIC data on TA, taking the average of all available quarters in the last year. This will ensure allocations are based on recent data and on average pressures, instead of a snapshot in time.

3.12 Using TA numbers reflects relative demand across the country and avoids penalising areas that invest upfront in their own TA stock and spend less on TA year-on-year as a result. While we know that historic data is not perfect and will not account for unforeseen events, trends in TA numbers do not rapidly fluctuate from one year to another and so serve as a reasonable proxy of future demand.

Question 2: Do you agree with the proposal to use ‘TA Numbers’ as a measure of TA demand?

Yes
No
Indifferent
If you have answered ‘no’ or ‘indifferent’, you are welcome to provide further comment on your reasoning and/or alternative approach [free text box]

Homelessness costs

3.14 In the current formula, homelessness costs are broadly measured by ‘prevention and relief into the PRS’, ‘lower quartile rents in the PRS’, and applying an ‘Area Cost Adjustment’ (ACA).

3.15 The ACA is an index used to measure the variation in the cost of delivering local government services in local authorities in England by quantifying the variation in rents, labour costs and travel times. The current formula uses the ACA to approximate the difference in the costs of delivering homelessness services across the country. The current formula also includes ‘lower quartile rents in the PRS’ because homelessness prevention activity costs are often associated with the level of rents in the area. In addition, the inclusion of ‘successful prevention and relief into the PRS’, aims to compensate local authorities that have a more constrained social rented sector and therefore must rely on the more expensive PRS sector.

3.16 In response to the previous 2022 consultation, there were several alternative suggestions for rent metrics, including growth of rents, rents by property type and ‘mean’ rents. There were also concerns that the ACA is not reflective of the specific relative costs of delivering homelessness services across the country.

3.17 From our testing, we looked at the differences between the distribution of rents and wages at a regional level, as well as the ACA in more detail. We also tested different rental metrics (mean and median rents compared to lower quartile rents of two bed properties in the PRS and different sized properties) and rent percentage increases. Our testing showed that alterations to the rental metrics used in the formula would not significantly change how funding is distributed and that lower quarter rents capture the variation in costs of many of the activities associated with prevention and relief services.

3.18 The rental metric used in the current formula, ‘The Private rental market summary statistics for England’, has been discontinued and superseded by ‘The Price Index of Private rents’. This uses a geometric mean instead of the lower quartile rent. A geometric mean, as opposed to a standard mean, reduces the risk of extreme values (e.g. very high rents) skewing the average.

3.19 Our engagement highlighted that the weights assigned to the different elements of the ACA are not as reflective as they could be of the costs associated with providing homelessness services, but that there is a case to include a metric to represent labour costs in the formula. Labour accounts for a significant proportion of local authority costs and the differential in cost across the country cannot be captured by a rent metric alone. Analysis of the HPG spend declarations shows that 29% of HPG expenditure is on labour costs. We tested different approaches to capturing labour, including using the Labour Cost Adjustment (LCA – which is the labour element of the ACA already used in the formula). The LCA captures variations in the going wage rate at a local level, controlling for factors such as industry and occupation make up. It therefore gives an approximation of the differences in the going wage rate for workers in the same job. Applying the LCA alongside a rental metrics allows us to apply bespoke weightings for homelessness services instead of those assigned by the ACA.

3.20 Therefore, in our new formula, we propose using ‘mean rents in the PRS’ with a ‘labour cost adjustment’ (LCA) to capture homelessness costs. Our proposal is to use the latest annual Office for National Statistics publication on PRS rents based on Valuation Office Agency data and the latest available MHCLG LCA estimate.

3.21 Overall, our analysis suggests that ‘mean rents’, alongside capturing the cost of labour, continue to be our best available metrics to capture differences in homelessness prevention and relief activities.

3.22 Following the 2022 consultation, a decision was taken to apply average costs to London to reflect the fact that London boroughs are in close proximity to one another and have particularly strong transport links between them, meaning it is common to secure accommodation in neighbouring boroughs and employ staff from the London-wide labour market. We propose continuing with this approach for London local authorities by using the London average LCA and London mean rents in the PRS.

Question 3: Do you agree with the proposal to use ‘mean rents in the PRS’ as a measure of homelessness costs?

Yes
No
Indifferent
If you have answered ‘no’ or ‘indifferent’, you are welcome to provide further comment on your reasoning and/or alternative approach [free text box]

Question 4: Do you agree with the proposal to use the ‘labour cost adjustment’ as a measure of homelessness costs?

Yes
No
Indifferent
If you have answered ‘no’ or ‘indifferent’, you are welcome to provide further comment on your reasoning and/or alternative approach [free text box]

Question 5: If your local authority is located within London, do you agree with the proposal to apply ‘average costs for London’?

Our local authority is not located within London
Yes
No
Indifferent
If you have answered ‘no’ or ‘indifferent’, you are welcome to provide further comment on your reasoning and/or alternative approach [free text box]

TA costs

3.23 In the current formula, TA costs are broadly captured within the ‘3-year average historic spend on TA’. This metric aims to compensate local authorities who spend more on homelessness services due to expensive TA.

3.24 In response to the previous 2022 consultation, concerns were raised that historic TA spend may not reflect current pressures and that the use of TA spend acted as a disincentive to invest in securing better quality, cheaper forms of TA.

3.25 As part of this review, we tested different approaches including different rental metrics (mean and median rents compared to lower quartile rents of two bed properties in the PRS) and rent percentage increases.

3.26 Our testing showed that alterations to the rental metrics used in the formula (mean and median rents replacing lower quartile two bed rents, as well as different sized properties) would not significantly change how funding is distributed.

3.27 We also tested whether we could reflect the different costs of different types of TA, given that some types of TA (e.g. nightly paid) are more expensive than others. However, the relationship between the cost and type of temporary accommodation varies significantly across the country, and we do not have an appropriate metric to capture these differences.

3.28 Therefore, in our new formula, we propose using ‘mean rents in the PRS’ to capture TA costs. Our proposal is to use the latest annual Office for National Statistics publication on PRS rents based on Valuation Office Agency data.

3.29 Rents are closely associated with the cost of temporary accommodation, so ‘mean’ are our best available metric to capture differences in TA costs.

3.30 As above, following the 2022 consultation, a decision was taken to apply average costs to London to reflect the fact that London boroughs are in close proximity to one another and have particularly strong transport links between them, meaning it is common to secure accommodation in neighbouring boroughs. We propose continuing with this approach.

Question 6: Do you agree with the proposal to use ‘mean rents in the PRS’ as a measure of TA costs?

Yes
No
Indifferent
If you have answered ‘no’ or ‘indifferent’, you are welcome to provide further comment on your reasoning and/or alternative approach [free text box]

Question 7: If your local authority is located within London, do you agree with the proposal to apply ‘average costs for London’?

Our local authority is not located within London
Yes
No
Indifferent
If you have answered ‘no’ or ‘indifferent’, you are welcome to provide further comment on your reasoning and/or alternative approach [free text box]

Question 6

4.  Approach to missing data

Accepted Answer

4.1 As part of this new formula, we will need an approach to missing data in case information on certain metrics is unavailable. Based on our proposed new measures in Section 3, the only metric that requires an approach to missing data is TA numbers, as other metrics, such as PRS rents and Housing Benefit/ Universal Credit claimants, are taken from national published data sets that have complete data.

4.2 Missing data is an ever-decreasing issue, with only very small proportions of local authorities not returning up-to-date H-CLIC data every quarter. In 2023/24, only 42 local authorities have one or more data points missing (quarterly) and only 3 local authorities have no data point available for the entirety of 2023/24. While data completeness is improving, we are aware there are rare occasions where a local authority is unable to return data due to factors outside of their control, such as a significant IT issue, and we need a missing data approach agreed for that eventuality.

4.3 In the current formula, when there is no TA data, we use a predictive method using a national H-CLIC estimate of TA and compare that to local authority proportions of RO4 (Revenue Outturn tables on TA spend). This is calculated by the difference between the national/ regional estimates and sum of local authority estimates for which data is available. This gives an approximation for the number of households in TA in those local authorities which have missing data. We then estimate their share of this total from the local authority RO4 share of spending on TA.

4.4 Our proposal is to continue with the existing approach to missing data and to apply this when a local authority has zero TA data within the annual data-set being used. Where a local authority has no TA data, then we will estimate their TA numbers based on the approach described in paragraph 4.3.

Question 8: Do you agree with the proposal to use RO4 (Revenue Outturn tables on TA spend) to approximate TA numbers where there is no TA data available for the given year?

Yes
No
Indifferent
If you have answered ‘no’ or ‘indifferent’, you are welcome to provide further comment on your reasoning and/or alternative approach [free text box]

Question 7

5.  Funding proportions

Accepted Answer

5.1 To reduce complexity, increase transparency and future-proof the formula, we propose separating out the individual elements of the formula into two distinct parts for TA pressures and prevention and relief pressures. In doing this, we also propose reconsidering the proportion of the overall Homelessness Prevention Grant (HPG) funding pot that is allocated to different parts of the formula.

5.2 Analysis of the new HPG spend declarations for 2023/24 suggest that the split of local authority spending from HPG is 49% spent on TA and the remaining 51% spent on prevention and relief – which includes 29% staffing costs. We understand much of the staff time will be spent on undertaking prevention and relief activity. We appreciate that these splits differ across different parts of the country.

5.3 Investment in homelessness prevention remains a top priority for this government. Using our analysis of HPG spend declarations in 2023/24, we are therefore proposing to allocate 45% of funding for temporary accommodation and 55% on prevention and relief to support local authorities to shift funding towards prevention. The illustrative allocations included in this consultation are based on a 45% TA and 55% prevention and relief weighting. Questions 9 and 10 seek views on this weighting and whether to take a phased approach to moving to this weighting.

Figure 5.1: Example HPG funding metrics and proportions

Homelessness Prevention Grant (Fixed Quantum of Funding)

Temporary Accommodation (45%): TA Numbers (yearly average) x Price index of private rents (2-bed mean)

Prevention and Relief Services (55%): HB + HC Claimants (30%) x Labour Cost Adjustment AND HB + HC Claimants (25%) + Price index of private rents (2-bed mean)

5.4 While we know that TA pressures are high, HPG accounts for only a portion of these total costs. Further insights from the HPG spend declaration suggests that a large proportion of TA costs are covered by sources outside of HPG. We, therefore, do not intend to fully capture TA pressures here, at the expense of prevention and relief activity and labour costs, where a greater proportion is funded by HPG. We recognise challenges with the wider funding landscape and will continue to engage across government on this as part of preparation for the multi-year Spending Review.

Question 9: What do you think is an appropriate split of HPG funding between temporary accommodation and prevention and relief?

45% TA and 55% prevention and relief
More than 45% on TA and less than 55% on prevention and relief
Less than 45% on TA and more than 55% on prevention and relief
Other
Indifferent
You are welcome to provide further comment on your reasoning and/or alternative approach [free text box]

Question 10: Should there be a phased approach to implementing a change in weighting? For example, implement a partial change in weighting in year 1 and the full change in year 2.

Yes
No
Indifferent
You are welcome to provide further comment on your reasoning and/or an alternative approach [free text box]

Question 11: If prevention and relief spend represented 55% of overall HPG funding, what do you think is an appropriate split between labour and rent costs?

30% labour 25% rents
More than 30% on labour
More than 25% on rents
Other
Indifferent
If you have answered ‘other or ‘indifferent’, you are welcome to provide further comment on your reasoning and/or alternative approach [free text box]

Question 8

6.  Transitional arrangements

Accepted Answer

6.1 In the 2022 consultation, 70% of responses were in favour of transitional arrangements being applied in the event of changing funding allocations resulting from changes to the formula.

6.2 The previous consultation concluded that transitional arrangements were important to provide stability to local services and mitigate significant and sudden financial decreases. Therefore, a cap was introduced on funding increases and decreases at the rate of 2% in 2023/24 and 5% in 2024/25.

6.3 Our engagement with local authorities indicates there is on-going support for implementing transitional arrangements as a principle in the case of changing allocations resulting from formula changes – noting it is important for local authorities to know how long transitional arrangements may last and for those due to see increases in funding do so as soon as possible.

6.4 We are, therefore, proposing that we implement transitional arrangements to mitigate significant changes in allocations as a result of changes to the HPG formula.

6.6 The specifics of these arrangements have yet to be determined, as they will be subject to the quantum of funding secured at the multi-year Spending Review.

Question 12: Do you agree with the proposal to use transitional arrangements to mitigate changes in funding allocations?

Yes
No
Indifferent
If you have answered ‘no’ or ‘indifferent’, you are welcome to provide further comment on your reasoning and/or alternative approach [free text box]

Question 13: Do you agree with the proposal to use transitional arrangements in line with the caps used in the previous formula (2% in the first year and 5% in the second)?

Yes - agree with 2% and 5%
No - the % caps should be lower
No - the % caps should be higher
No - I do not agree with transitional arrangements
Indifferent

Question 14: If you answered Q13 with “the % caps should be lower – what % range would you prefer?

Up to 1%
Up to 2%
Up to 3%
Up to 4%
Up to 5%
None of the above
Indifferent

Question 15: If you answered Q13 with “the % caps should be higher – what % range would you prefer?

5-10%
10-15%
15-20%
Higher than 20%
None of the above
Indifferent

Question 16: Do you agree with the proposal for transitional arrangements to be tapered between financial years?

Yes - I agree the cap should be increased in later years
No - the % caps should be the same in all years
No - I do not agree with using transitional arrangements
Indifferent
If you have answered ‘no’ or ‘indifferent’, you are welcome to provide further comment on your reasoning and/or alternative approach [free text box]

Question 9

Annex A: The current HPG formula

Accepted Answer

1.1 The current Homelessness Prevention Grant (HPG) formula applies to the allocation of £310 million of funding per year in 2023-25. The formula was also used, in part, to allocate in-year top ups, including to help prevent homelessness amongst Ukrainians and for new burdens funding associated with the expansion of priority need to those who are homeless as a result of domestic abuse. For simplify and to make it easier to compare the impact of changes, this explanation does not account for those top ups or additional funding provided in 2023/24 and 2024/25 to prevent cash losers when we transitioned to the current formula.

1.2 The current formula is split into two main elements: The Flexible Homelessness Support Grant (FHSG) portion and the Homelessness Reduction Grant (HRG) + Uplift. See figure A.1, below.

Figure A.1: Breakdown of the current formula

FHSG + (HRG + Uplift) = HPG

FHSG: (total Prevention and Relief duties owed + Successful Prevention and relief into the PRS) x PRS Rents

OR Three-year average historic spend share on temporary accommodation costs x 90%

OR £40,000 Minimum Allocation

(HRG + Uplift)

Relative Homelessness Pressures (80%):

Number of housing benefits claimants x PRS rents + (ACA x 8 hours x £ 15 per hour) + Single adult households owed a prevention or relief duty x ACA

1.3 Of the above £310 million, the FHSG portion is the biggest part of the formula, accounting for £200 million. Its aim is to reflect relative homelessness pressures and to protect local authorities with historically high levels of TA. Each local authorities’ share is calculated by taking the greatest of either:

homelessness pressures estimated using the total of prevention and relief duties owed and successful prevention and relief cases achieved by securing a Private Rental Sector (PRS) tenancy, weighted by PRS rents; or
90% of their 3-year average spend on TA as recorded in MHCLG revenue outturn tables; or a minimum allocation of £40,000. The ‘3-year average spend on TA spend’ metric was introduced after the 2022 consultation replacing the DWP TAMF element previously applied to the formula.

1.4 The HRG + Uplift portion of the formula accounts for the remaining £110 million of funding and aims to capture homelessness prevention and relief pressures. It is further split into two elements: 1) 80% is allocated to reflect relative homelessness pressures, and 2) 20% is allocated based on single homelessness pressures.

1.5 The part on relative homelessness pressures is estimated by taking the total number of Housing Benefit (HB) and Universal Credit (UC) claimants and weighting them by the PRS lower quartile two-bed rent. In addition, a per claimant estimate of staffing costs is applied by assuming each claimants requires 8 hrs of staff time, paid an average of £10 per hour. Shares are weighted by the Area Cost Adjustment (ACA), an index used to quantify the variation in costs of delivering services for local authorities due to the combination of differences in rents, labour costs and travel times. Single homelessness pressures are calculated by taking the share of single households owed a prevention or relief duty, weighted by the ACA.

1.6 Currently there is an overlap between the FSHG and the HRG + Uplift parts of the formula, as they both account for a mixture of TA and prevention and relief activity – a complexity that we aim to address in this consultation.

1.7 The different elements of the formula draw on a range of different data sources. All metrics used and the corresponding sources are detailed in the table below:

Data Used	Data Source
Total Prevention and Relief Duties Owed	MHCLG, Homelessness Statistics (H-CLIC)
Prevention into the PRS	MHCLG, Homelessness Statistics (H-CLIC)
Relief into the PRS	MHCLG, Homelessness Statistics (H-CLIC)
Single Adult Households Prevention and Relief Duties	MHCLG, Homelessness Statistics (H-CLIC)
Three-year historic TA costs	MHCLG, Revenue Outturn Data (RO4)
Area Cost Adjustment (ACA)	MHCLG, Area Cost Adjustment
PRS Rental Costs	ONS, Private Rental Market Summary Statistics in England
Housing Benefit Claimants	DWP, Housing Benefit Claimants

Question 10

About this consultation

Accepted Answer

This consultation document and consultation process have been planned to adhere to the Consultation Principles issued by the Cabinet Office.

Representative groups are asked to give a summary of the people and organisations they represent, and where relevant who else they have consulted in reaching their conclusions when they respond.

Information provided in response to this consultation may be published or disclosed in accordance with the access to information regimes (these are primarily the Freedom of Information Act 2000 (FOIA), the Environmental Information Regulations 2004 and UK data protection legislation. In certain circumstances this may therefore include personal data when required by law.

If you want the information that you provide to be treated as confidential, please be aware that, as a public authority, the Department is bound by the information access regimes and may therefore be obliged to disclose all or some of the information you provide. In view of this it would be helpful if you could explain to us why you regard the information you have provided as confidential. If we receive a request for disclosure of the information we will take full account of your explanation, but we cannot give an assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not, of itself, be regarded as binding on the Department.

The Ministry of Housing, Communities and Local Government will at all times process your personal data in accordance with UK data protection legislation and in the majority of circumstances this will mean that your personal data will not be disclosed to third parties. A full privacy notice is included below.

Individual responses will not be acknowledged unless specifically requested.

Your opinions are valuable to us. Thank you for taking the time to read this document and respond.

Are you satisfied that this consultation has followed the Consultation Principles? If not or you have any other observations about how we can improve the process please contact us via the complaints procedure.

Question 11

Personal data

Accepted Answer

The following is to explain your rights and give you the information you are entitled to under UK data protection legislation.

Note that this section only refers to personal data (your name, contact details and any other information that relates to you or another identified or identifiable individual personally) not the content otherwise of your response to the consultation.

1. The identity of the data controller and contact details of our Data Protection Officer

The Ministry of Housing, Communities and Local Government (MHCLG) is the data controller. The Data Protection Officer can be contacted at dataprotection@communities.gov.uk or by writing to the following address:

Data Protection Officer
Ministry of Housing, Communities and Local Government
Fry Building
2 Marsham Street
London
SW1P 4DF

2. Why we are collecting your personal data

Your personal data is being collected as an essential part of the consultation process, so that we can contact you regarding your response and for statistical purposes. We may also use it to contact you about related matters.

We will collect your IP address if you complete a consultation online. We may use this to ensure that each person only completes a survey once. We will not use this data for any other purpose.

Sensitive types of personal data

Please do not share special category personal data or criminal offence data if we have not asked for this unless absolutely necessary for the purposes of your consultation response. By ‘special category personal data’, we mean information about a living individual’s:

race
ethnic origin
political opinions
religious or philosophical beliefs
trade union membership
genetics
biometrics
health (including disability-related information)
sex life; or
sexual orientation

By ‘criminal offence data’, we mean information relating to a living individual’s criminal convictions or offences or related security measures.

3. Our legal basis for processing your personal data

The collection of your personal data is lawful under article 6(1)(e) of the UK General Data Protection Regulation as it is necessary for the performance by MHCLG of a task in the public interest/in the exercise of official authority vested in the data controller. Section 8(d) of the Data Protection Act 2018 states that this will include processing of personal data that is necessary for the exercise of a function of the Crown, a Minister of the Crown or a government department i.e. in this case a consultation.

Where necessary for the purposes of this consultation, our lawful basis for the processing of any special category personal data or ‘criminal offence’ data (terms explained under ‘Sensitive Types of Data’) which you submit in response to this consultation is as follows. The relevant lawful basis for the processing of special category personal data is Article 9(2)(g) UK GDPR (‘substantial public interest’), and Schedule 1 paragraph 6 of the Data Protection Act 2018 (‘statutory etc and government purposes’). The relevant lawful basis in relation to personal data relating to criminal convictions and offences data is likewise provided by Schedule 1 paragraph 6 of the Data Protection Act 2018.

MHCLG may appoint a ‘data processor’, acting on behalf of the department and under our instruction, to help analyse the responses to this consultation. Where we do we will ensure that the processing of your personal data remains in strict accordance with the requirements of the data protection legislation.

5. For how long we will keep your personal data, or criteria used to determine the retention period

Your personal data will be held for 2 years from the closure of the consultation, unless we identify that its continued retention is unnecessary before that point.

6. Your rights, e.g. access, rectification, restriction, objection

The data we are collecting is your personal data, and you have considerable say over what happens to it. You have the right:

a. to see what data we have about you

b. to ask us to stop using your data, but keep it on record

c. to ask to have your data corrected if it is incorrect or incomplete

d. to object to our use of your personal data in certain circumstances

e. to lodge a complaint with the independent Information Commissioner (ICO) if you think we are not handling your data fairly or in accordance with the law. You can contact the ICO at https://ico.org.uk/, or telephone 0303 123 1113.

Please contact us at the following address if you wish to exercise the rights listed above, except the right to lodge a complaint with the ICO: dataprotection@communities.gov.uk or

Knowledge and Information Access Team
Ministry of Housing, Communities and Local Government
Fry Building
2 Marsham Street
London
SW1P 4DF

7. Your personal data will not be sent overseas

8. Your personal data will not be used for any automated decision making

9. Your personal data will be stored in a secure government IT system

We use a third-party system, Citizen Space, to collect consultation responses. In the first instance your personal data will be stored on their secure UK-based server. Your personal data will be transferred to our secure government IT system as soon as possible, and it will be stored there for 2 years before it is deleted.

The ACA is an index which quantifies this variation by bringing together labour costs, rents and travel times. ↩

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