Research and analysis

Office for Value for Money (OVfM): procuring short-term residential accommodation

Updated 26 November 2025

1. Summary

The Office for Value for Money (OVfM) conducted a study into the planning and procurement of short-term residential accommodation by the public sector given the high risk to value for money in this area. This is because of a lack of co-ordination and planning in procurement of short-term residential accommodation, a steep rise in costs, and likely ongoing reliance on it in the short-term.

To improve Value for Money (VfM), the OVfM has worked with others in government to develop principles for a future approach to procuring short-term residential accommodation. These principles are: moving towards greater local delivery to support integration and outcomes, with national planning and coordination to support a longer-term approach, underpinned by new procurement models and measures to support required capacity.

Moving to this future approach would be complex and take time, but the steps the government has taken are already showing benefits. The Ministry for Housing, Communities and Local Government (MHCLG) and the Home Office are working with local government to test new locally led models and these will inform future decisions on the implementation of the principles for the future approach.

2. Introduction 

Short-term residential accommodation is procured by local authorities and by multiple central government departments, including the Home Office, the Ministry of Defence (MOD), and the Ministry of Justice (MoJ). It is used for a range of different groups, including the homeless, asylum seekers, Afghan arrivals and prison leavers.

The scale of spend in this area is significant. In 2024-25, the Home Office spent £2.1 billion on hotels as part of asylum support, while local authorities separately spent over £2.8 billion on procuring short-term residential accommodation.^{[footnote 1]} The unit cost of short-term residential accommodation has also increased significantly in recent years.

Demand for short-term residential accommodation across all of the groups mentioned above is likely to remain high without action in the near future, given other pressures on housing supply, and risks presented by global instability. The NAO’s recent report on homelessness concluded that the wide-scale use of temporary accommodation is likely to continue to be required in the short term.^{[footnote 2]}

Independent experts, including the NAO and Centre for Homelessness Impact, have identified shortcomings in the procurement of short-term residential accommodation that may have prompted these issues: there is limited coordination between public sector bodies, which may in and of itself be driving increased costs to the Exchequer, and capacity and capability for procuring short-term residential accommodation has been spread thinly across government departments and local authorities.^{[footnote 3]}

Given the lack of co-ordination and planning in procurement of short-term residential accommodation, the steep rise in costs, and likely ongoing reliance on it in the short term, the OVfM identified a value for money case for improving the planning and procurement of short-term residential accommodation across central and local government, and decided to conduct a study into this issue with relevant government departments.

The study was led by the Office for Value for Money, working with the Home Office, MHCLG, MOD, MoJ and others in HM Treasury (HMT), with input from the Cabinet Office and the Government Commercial Function.

3. Study scope

The study considered any form of accommodation that is provided at public expense while an individual or family is awaiting longer-term housing.  This included but is not limited to accommodation in hotels, bed & breakfasts, and the private rented sector.

The study did not consider who is entitled to short-term residential accommodation; how to tackle the longer-term drivers of demand for short-term residential accommodation; or broader questions related to the government’s housing strategy. These are policy issues that the Home Office and MHCLG are addressing, so the OVfM did not want to duplicate this and instead saw an opportunity to improve the value for money of government spending on the procurement of accommodation.

The study investigated a range of issues, including:

• the relationship between central and local government, the nature of devolution arrangements, and their implications;
• how to make the most of capacity and capability for procurement of short-term residential accommodation within central and local government, balanced against the need for incentives to manage demand; and
• the functioning of the market, and how to develop a stronger pipeline of appropriate supply.

The study was also informed by engagement with local authorities, the Local Government Association, the Centre for Homelessness Impact, and other relevant experts.

4. Outputs of the OVfM study

In June 2025 UK Infrastructure: A 10 Year Strategy published the outputs of the OVfM’s study. It set out principles for a future approach to procuring short-term residential accommodation: moving towards greater local delivery to support integration and outcomes, with national planning and coordination to support a longer-term approach, underpinned by new procurement models and measures to support required capacity.^{[footnote 4]} It also set out that moving to this future approach would be complex and take time, and that relevant government departments would work together to build the evidence base and support implementation through:

• working in partnership with local government to determine how to move towards greater involvement by local areas in the provision of accommodation and wraparound services;
• using the evaluation from pilots that are testing greater involvement by local areas in providing accommodation; and
• exploring new financing models to support the supply of accommodation.

5. Government investments at Spending Review 2025

Alongside publication of the outputs of the OVfM study in June 2025, Spending Review 2025 (SR25) announced investments to move away from the current model of contracting expensive short-term accommodation, and bring down future costs for the different groups.

This included £200 million for the Home Office to accelerate the transformation of the asylum system and end the costly use of asylum hotels in this Parliament by clearing the asylum backlog, increasing appeals capacity and continuing to return those with no right to be here.

SR25 also protected spending on homelessness and rough sleeping by MHCLG, a record level of investment of over £1 billion per year, and provided an additional £100 million to fund increased homelessness prevention activity by local authorities.

SR25 also confirmed £39 billion for the Social and Affordable Homes Programme, the biggest boost to social and affordable housing investment in a generation. The government is also providing £950 million for the fourth round of the Local Authority Housing Fund — the largest round of the Fund to date — to deliver up to 5,000 homes. This adds to the £500 million already invested under the third round to support local authorities in England to deliver 2,700 homes by 2026. The Fund will support local authorities to increase the supply of better quality temporary accommodation, driving down the use of B&Bs and other expensive and unsuitable accommodation for families with children.

6. Actions since publication of the OVfM study

Since the summer, the government has taken action to drive better VfM from the procurement of short-term residential accommodation, which will inform the evidence base to support better coordination and greater involvement by local areas.

The government will continue to work with local authorities to develop more locally-led accommodation models which could deliver better outcomes for communities and taxpayers into the future, including through HMG’s Afghan resettlement pilots, and a new £500 million fund for a more sustainable model of asylum accommodation. This funding will be delivered by MHCLG in partnership with Home Office and local councils, to deliver better outcomes for communities and taxpayers. In the longer term, this fund will support local authorities to leave a lasting legacy of housing for local communities and reduce pressure on local housing markets. MHCLG and the Home Office are committed to continue working closely with devolved governments and local government to co-design this new model, building on the work undertaken to date.

Through the Emergency Accommodation Reduction Pilots, supported by £8 million, the government is working with 20 local authorities with some of the highest levels of B&B use for temporary accommodation to test innovative approaches and kickstart new initiatives to provide more suitable accommodation for homeless families. The pilot areas have delivered significant reductions in the number of households with children in B&Bs for over six weeks, with particularly significant reductions in Bournemouth, Christchurch and Poole, Tower Hamlets, Enfield and Waltham Forest.

The Home Office is also exploring a variety of short-, medium- and longer-term options, in collaboration with other government departments - supporting the commitment to end the use of hotels whilst delivering a more sustainable, flexible system. Decisions on potential options such as former student accommodation and government-owned properties will be made on a site-by-site basis, and the Home Office will continue to work closely with local authorities and in compliance with all rules and regulations.

Evidence from the government’s investment and these pilots will inform future decisions on the implementation of the OVfM’s principles for the procurement and planning of short-term residential accommodation.

1. National Audit Office (2024), Investigation into asylum accommodation; National Audit Office (2024), The effectiveness of government in tackling homelessness. Local authority spend based on cost of temporary accommodation for homeless households in 2024-25, from Local authority revenue expenditure and financing England (RO4). ↩

2. National Audit Office (2024), The effectiveness of government in tackling homelessness. ↩

3. IPPR (2024), Transforming asylum accommodation ↩

4. HMT and National Infrastructure and Service Transformation Authority (2025), UK Infrastructure: A 10 Year Strategy ↩