UK Asylum Accommodation Pilot Stalls as Councils Await Funding

The Home Office and MHCLG unveiled a £500 million pilot to let local authorities purchase or build up to 900 homes for asylum seekers, shifting from privately-run hotels to council-owned units that could later become social housing.

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Before 1999 councils housed asylum seekers directly; a dispersal system then introduced private contractors, leading to the 2019 AASCs run by Mears, Serco and Clearsprings, costing £15.3 billion, far above the original £4.5 billion estimate.

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Around 200 authorities, including Powys County Council, Brighton & Hove City Council (leader Bella Sankey), Newcastle, Hackney, Medway, Peterborough and Oxford, signalled interest. Powys warned of “no progress or decisions” from the Home Office; Brighton & Hove urged the Home Office to “start rolling this out as soon as practical.” Funding remains pending.

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The £500 million pilot budget remains unallocated. In the year to March 2025 the Home Office spent £4 billion on asylum-seeker support, £2.1 billion of which funded hotel accommodation for 20,885 people (22 % of 93,653). Hotel stays cost £144 per night versus £23.25 for private-rented HMOs.

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The government says the funding will let councils provide “basic alternative accommodation” temporarily, with properties first leased to the Home Office before conversion to social housing. It stresses that new council housing “will not be used by illegal migrants under any circumstances” and aims for value for money and relief for local housing markets.

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Local authorities decry the lack of a clear timetable and unallocated funds, arguing that delays extend reliance on costly hotels. Far-right protests at the Bell Hotel in Epping, which sparked vandalism and police clashes, highlight community tension over hotel placements.

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The Chartered Institute for Housing notes that “spending of the £500 million earmarked for the pilot has not yet been decided,” while the Home Office says the scheme is proceeding. Details on fund disbursement timing and council selection criteria remain undisclosed.

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• “there has been no progress or decisions made by the Home Office to date in respect of this” — Powys County Council

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• “We’re keen to get started on the pilot and would encourage the Home Office to start rolling this out as soon as is practical.” — Bella Sankey, Leader, Brighton & Hove City Council

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• “Spending of the £500m earmarked for the pilot has not yet been decided, despite the fact that various councils have expressed a strong interest,” — Chartered Institute for Housing

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• “New council housing will not be used by illegal migrants under any circumstances.” — Home Office

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The Independent Chief Inspector for Borders and Immigration (ICIBI) has opened an inspection of Home Office engagement with local authorities, with findings due in August. A break clause in the current AASC contracts, effective this year, could let the pilot launch once funding is confirmed.

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