Guidance

Homelessness Prevention Grant 2023 to 2025: technical note

Updated 28 February 2024

Applies to England

Background

In July 2022 we launched a consultation on technical changes to the funding arrangements for the Homelessness Prevention Grant, which will apply for 2023-24 and 2024-25. Following consultation, we have decided to introduce an updated funding formula. View our full response to the consultation.

This document provides a technical description of how we calculated the allocations for the Homelessness Prevention Grant using this new formula.

Homelessness Prevention Grant funding formula: 2023-24 and 2024-25

We consider the allocations in 4 stages:

• The first stage considers the allocation of £200 million which reflects relative homelessness pressures, while at the same time aims to reflect persistent Temporary Accommodation pressures faced by local authorities
• The second stage considers the allocation of £110 million, which reflects relative homelessness prevention and relief pressures
• The third stage considers transitional arrangements for changes to funding allocations
• The fourth stage considers the allocation of additional funding to fund new burdens following the implementation of the changes in the Domestic Abuse Act 2021.

For local authorities that have recently merged, allocations are calculated as the sum of what would have been allocated for their constituent parts. See below for a list of local authority mergers.

1. £200 million

The first £200 million is allocated according to a formula which reflects relative homelessness pressures, while at the same time aims to reflect persistent Temporary Accommodation pressures faced by local authorities.

We have calculated relative homelessness pressures by adding the total number of prevention and relief cases to the number of prevention and relief cases achieved by securing a private rented sector tenancy, with the following adjustments:

• To take account of different private sector rental costs in different areas
• To ensure a minimum allocation level of £40,000
• To ensure that no authority receives an allocation less than 90% of their 3-year average historic spend share on temporary accommodation costs

DLUHC homelessness statistics (H-CLIC) from the year to March 2022 were used to assess levels of homelessness prevention and relief cases.

ONS private rental market summary statistics in England for the year to March 2022 were used to assess private sector rental costs in different areas.

DLUHC local authority revenue expenditure and financing data – revenue outturn housing services RO4 from the financial years 2019-20 to 2021-22 inclusive were used to assess 3-year average historic spend on temporary accommodation costs.

Missing data

Where homelessness data are not available, local authority-level estimates are calculated by apportioning published regional figures based on their percentage share of a 3-year average of historic temporary accommodation spend, or population-weighted area cost adjustment if historic temporary accommodation spend is not available.

The data are then distributed using these shares, and adjusted using a missing data multiplier of 0.75 to ensure local authorities cannot gain by not providing data. Where revenue outturn data are missing for 1 or more of the 3 years, we take an average of the data across the remaining years.

2. £110 million

First 80%

The first 80% of the £110 million funding uplift is allocated to reflect relative homelessness prevention and relief pressures. We derive a relative estimate of pressures using the following elements:

• A: The number of housing benefit claimants at December 2021. We expect this to reflect the relative number of households becoming homeless. This is the sum of private and social rented sector housing benefit claimants and households on universal credit with a housing entitlement in the private and social rented sector. This information can be found on DWP stat xPlore.

• B: lower quartile monthly private rented sector rents for 2-bedroom properties 2021-22. This reflects the relative costs of prevention in terms of securing accommodation for homeless households. This is available from Private rental market summary statistics in England - table 2.4. We apply a London-wide average rent for London boroughs, in recognition of the fact 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.

• C: area cost adjustment, as used in allocating COVID-19 related funding to lower-tier authorities. This reflects the relative costs of prevention in terms of staff time. More detail is available in Annex B of the Technical note on allocation of tranche 4 of COVID-19 local authority funding (PDF, 307KB). Data is available at Coronavirus (COVID-19): emergency funding for local government in 2020 to 2021 and additional support in 2021 to 2022.

Again, we apply a London-wide average area cost adjustment for London boroughs as the particularly strong transport links between them means it is common to employ staff from the London-wide labour market,

The relative pressure is calculated using the following formula:

The allocation share for each local authority (i) is derived as the proportion of the total pressure in each local authority:

Missing data

Variable A

We do not have a total number of housing benefit claimants for newly formed councils. We estimate the total using the values for the local authorities merged to form the councils.

Variable B

We do not have rent data for newly formed councils.

We estimate rents in these local authorities using a weighted average of rents across the local authorities that merged to create them. For these areas the weights are based on the total number of homelessness prevention and relief duties owed in 2021-22.

Variable C

We do not have data on an area cost adjustment for Isles of Scilly. We use the area cost adjustment for Cornwall as a proxy.

Final 20%

The remaining 20% of the £110 million funding is allocated based on single homelessness pressures. This is calculated as the total single adult households owed a prevention or a relief duty in 2021-22 and adjusted using the area cost adjustment. See homelessness live tables data.

Shares are calculated as the proportion of all single adult households owed a duty in each authority.

Missing data

Where there is missing data in the published tables, we estimate local authority shares using the share of the first 80%, but reduce this share by 25% to ensure that local authorities do not gain (relative to 75% of local authorities) as a result of missing data. We then rescale all shares to ensure the total across all local authorities adds to 100%.

3. Transitional arrangements

No authority will experience a cash loss compared to the previous year in their allocation. Funding increases compared to the previous year will be capped at 2% in 2023-24 and 5% in 2024-25.

To ensure local authority allocations are within the transitional arrangements (+/- 2% in year 1, +/- 5% in year 2), we apply transitional adjustments. All indicative allocations pre-transitional adjustments are multiplied by a transitional scaling factor. This adjusts all allocations by the same amount, and first ensures allocations are within the transitional arrangement limits, and then that total allocations equal £310 million.

If after applying the transitional scaling factor allocations are within the transitional arrangement limit (+/-2% in year 1, +/-5% in year 2), they are excluded from further calculations. If, however, they remain beyond the transitional arrangement limit, all authorities beyond the limit are again modified by a transitional scaling factor. This adjusts the remaining allocations to ensure they are within the limits, and that the overall funding amount is £310 million.

This process is repeated until all allocations are within the transitional arrangement limits and the total allocations are equal to £310 million.

Once this process is completed and all allocation are within +/- 2% of their respective 2022-23 allocations for 2023-24 and +/-5% of their respective 2022-23 allocations for 2024/-25, we make a further adjustment to ensure that no authority will experience a cash loss compared to the previous year. We calculate the amount of funding required so that all authorities that show a reduced indicative allocation will instead maintain their allocation from the previous year. The calculated amount of funding for each year (£3 million in 2023/24 and £7.1 million in 2024/25) is added to the core £310 million.

4. Domestic abuse new burdens

Additional funding has been included to meet the new burdens following the expansion of priority need to those who are homeless as a result of domestic abuse, which came into force in July 2021 following the landmark Domestic Abuse Act 2021.

We have assessed £9.8 million as the total cost of meeting the new burdens associated with this change in 2023-24, and £14.2 million as the total cost in 2024-25. The additional funding is allocated using the same formula as the £110 million to reflect relative homelessness pressures, outlined above. We use the same data points as outlined above.

Total Homelessness Prevention Grant funding: 2023-24 and 2024-25

Overall, the £322.8 million Homelessness Prevention Grant for the 2023-24 financial year constitutes £313 million allocated via the first 3 stages of allocating the Homelessness Prevention Grant outlined above, and £9.8 million allocated via domestic abuse new burdens funding. This represents an increase of £7 million on the 2022-23 allocation.

The £331.3 million Homelessness Prevention Grant for the 2024-25 financial year constitutes £317.1 million allocated via the first 3 stages of allocating the Homelessness Prevention Grant outlined above, and £14.2 million allocated via domestic abuse new burdens funding. This represents an increase of £15.5 million on the 2022-23 allocation.

Local authority mergers

New Somerset

• Mendip
• Sedgemoor
• Somerset West and Taunton
• South Somerset

Cumberland

• Allerdale
• Carlisle
• Copeland

Westmorland and Furness

• Barrow-in-Furness
• Eden
• South Lakeland

North Yorkshire

• Craven
• Hambleton
• Harrogate
• Richmondshire
• Ryedale
• Scarborough
• Selby