Guidance

Terms of Reference for Thematic VfM Review on Homelessness

Published 20 January 2026

1. Background

The causes of homelessness and rough sleeping are multi-faceted and varied for each individual household and there is no one-size-fits-all solution to these challenges. However, the current system of homelessness funding is too focused on managing a crisis, rather than moving to upstream prevention. As a result, it does not sufficiently address the whole life impacts on people experiencing homelessness, nor the long-term and cross government costs this creates.

Currently, over 130,000 households live in temporary accommodation, of which 84,000 are families with children, including 172,000 children.

There are significant costs across government from homelessness: people sleeping rough use public services more than the general population, at an average cost of around £14,000 per person sleeping rough in 2024/25, largely in costs to the NHS and prisons. Spending time in temporary accommodation also impacts children’s education and attainment, as well as individuals’ ability to continue employment.^{[footnote 1]}

A significant proportion of temporary accommodation is relatively stable and self-contained; however, this is not the case universally. Whilst the use of bed & breakfast accommodation is falling significantly, use of nightly paid accommodation has soared from less than 3,500 households in 2010 to almost 50,000 in Q2 of 2025. This is not only often poor quality but is also hugely expensive and contributes significantly to overall temporary accommodation costs. In 2024/25, £2.8bn was spent on all forms of temporary accommodation, from £564 million in 2010/11^{[footnote 2]}. This creates additional pressures for councils and a downward spiral where more expensive temporary accommodation leads to councils having less to spend to prevent homelessness from occurring.

The supported housing sector in England is at crisis point. In 2025, half of providers said they would have to close or decommission some schemes, and a fifth of providers said they were seriously considering withdrawing from the supported housing sector altogether^{[footnote 3]}. In 2023, the number of bedspaces in England at accommodation projects for single homeless people was 32,466, a decrease of around 23,000 since 2008.

2. Objectives

The review will assess the underlying cost-effectiveness of cross government spend that helps to prevent and relieve all forms of homelessness, and will make actionable recommendations that improve efficiency, accountability, outcomes, and reduce financial pressures on councils. The review will also explore accommodation delivery models, including novel and innovative ways approaches to temporary accommodation and the supported housing sector. The findings will inform decisions for future policy development.

3. Scope

The scope of this review will include:

• Expenditure across central and local government to prevent and address homelessness. Departments will agree a full list of funding lines within scope of the review and will seek to ensure funding is directed towards the highest value interventions that improve housing and related (e.g. employment, education, and health) outcomes and cost-effectiveness;
• Temporary accommodation delivery models and incentives to landlords and councils. It should consider how councils manage and operate temporary accommodation stock, alongside opportunities to improve both quality and value for money;
• Supported housing delivery models, focusing on the development of cost-effective housing models that achieve the best outcomes for different cohorts, including care-experienced young people, people with substance use issues, those with disabilities, and former Armed Service personnel.

We will also seek views from externals via the Homelessness Expert Group which includes representatives from front-line services, local government, and the third sector.

4. Governance

Interdepartmental governance will be established at ministerial and official level. This will include identifying an appropriate senior responsible officer (SRO) and establishment of cross-departmental steering and working groups to facilitate day-to-day activities. Evidence from this review will be reported back to CST and ministers in MHCLG and DWP.

Where the review overlaps with other related pieces of work, governance arrangements will be aligned and rationalised to minimise duplication.

5. Timetable

The review will commence in January 2026 and is expected to conclude in advance of Spending Review 2027 (SR27). Its final output will provide recommendations to inform SR27 planning and support decisions on how resource reallocation can be effectively delivered within future Spending Review settlements.

Review findings, together with the evidence underpinning them, will be shared across government.

1. 2023 Annual Review of Support for Single Homeless People in England - Homeless Link ↩

2. Due to data categorisation in local authority revenue expenditure, we cannot not directly compare the exact spend, but this is our best measure of spend. ↩

3. National Housing Federation - The risk of closure for supported housing providers: member survey 2025 ↩