Crisis Point: How Lucrative Asylum Seeker Contracts Are Fuelling the UK's Housing Crisis, Pushing Up Rents, and Increasing Homelessness.

With a social housing waiting list of 1.33 million households, a new trend of landlords evicting tenants for lucrative government deals could trigger a major political backlash.

(Image: The Economist)

Well, today, I’ve been giving what’s left of my brain a thorough workout - yes, I do occasionally, and I’m turning my attention to more serious stuff. So, here I go, and wish me luck. It may all fall apart before I reach the end.

The UK's housing crisis has reached a tipping point, with the latest figures showing a staggering 1.33 million households on social housing waiting lists in England, the highest figure in a decade. But a new, politically charged dynamic is threatening to make the situation even worse: a growing number of private landlords are reportedly using no-fault evictions, a practice that coincides with an increase in highly profitable, long-term government contracts to house asylum seekers. This is creating a major problem for the UK rental market and contributing to a growing homelessness crisis.

This trend is a direct, albeit unintended, consequence of the government's push to move migrants out of expensive hotels and into alternative accommodation. The Home Office contracts with private companies like Serco and Mears to find suitable properties. In a private rental market facing significant legislative changes—including the proposed abolition of Section 21 evictions—these contracts offer landlords a uniquely attractive proposition. This raises the question: why is the UK housing crisis so bad?

The financial arrangements, which are funded directly by the Home Office rather than through local government housing benefits, are proving irresistible for some landlords. The initial 10-year contracts, awarded in 2019 under the previous Conservative government, were estimated to be worth £4 billion. However, due to a surge in demand, Home Office spending on asylum accommodation has since spiralled, with the National Audit Office (NAO) reporting that the total cost over the decade is now estimated at £15.3 billion. For landlords, this provides a guaranteed, long-term income, often at a higher rate than the open market, with full-service management provided by the government's contractors.

This has created a worrying imbalance. Legal residents, including families and those on Housing Benefit, are being served eviction notices through no fault of their own. Official statistics show the pressure this is creating, with a record 131,140 households in temporary accommodation as of March 2025—an 11.8% increase in just one year. These households, which include more than 169,000 children, are being forced to compete for a shrinking pool of affordable private rentals. While this trend is primarily driven by wider market pressures such as landlords selling up due to rising interest rates, the lucrative nature of asylum seeker contracts creates an incentive that further exacerbates the problem.

The Looming Political Crisis for the Labour Government.

It is a crucial point that no-fault evictions have not yet become illegal. The Renters' Rights Bill, which would abolish Section 21, is currently making its way through Parliament. While it has now completed its passage through the House of Lords and is expected to receive Royal Assent in late 2025, the key changes are not expected to come into force until early to mid-2026. This means that for now, no-fault evictions remain a legal tool for landlords.

By pushing for a rapid move out of hotels, the government is increasing demand on a private rental sector that is already under severe strain. The abolition of no-fault evictions could lead to a "landlord exodus," as some landlords, unwilling to navigate a more complex eviction process, sell their properties. This would shrink the supply of available homes, driving up rents and swelling the number of households on already record-high waiting lists and in temporary accommodation. This creates a challenging situation for a government elected on a promise to fix the UK housing crisis.

This creates a highly volatile situation for the Labour government. The planned abolition of no-fault evictions, a key manifesto pledge, is intended to provide greater security for tenants. However, critics argue that without a major reform of the court system to handle a likely surge in Section 8 eviction claims, this could make the private rental market unviable for many landlords.

It is important to acknowledge that the chances of a sudden, mass outbreak of no-fault evictions of private and housing benefit tenants in favour of these government contracts are remote. However, even a small handful of such cases could be enough to trigger direct action from already agitated protesters. Political commentators and tenant unions alike have warned that the combination of these factors—the symbolic injustice of British citizens being displaced while the government pays private landlords lucrative fees to house asylum seekers—could lead to a massive public backlash. This would dwarf the scale of the current demonstrations. The Labour government, elected on a promise to fix the UK housing crisis, is now in the difficult position of having its key policies blamed for exacerbating the very problems it sought to solve.

How will this affect taxes and benefits, and who, ultimately, will pay?

The spiralling costs of the current system pose a direct threat to the UK's financial stability and social contract. While the Home Office's spending on asylum accommodation is funded separately and does not directly come from the UK benefits system, its sheer scale—projected at over £15.3 billion—is paid for through a combination of taxation and government borrowing. As the national debt sits at over 96% of GDP, this continued borrowing places a significant burden on the taxpayer and future generations, who will ultimately foot the bill for both the short-term hotel costs and any long-term infrastructure investments.

Furthermore, the pressure on the UK benefits system is rising from an entirely different direction. The housing crisis, exacerbated by the displacement of British residents from the private rental market, is forcing a record number of households into temporary accommodation. While asylum seekers are not eligible for benefits, the homeless families who are now being housed by councils are. The resulting rise in social security and Housing Benefit costs places further strain on the public purse, forcing the government to consider difficult choices between tax rises, cuts to public services like the NHS and education, or a further increase in unsustainable borrowing.

Why a Clampdown on Migrant Hotels Could Backfire and What to Do Instead.

The political and public push to clamp down on the use of migrant hotels, while seemingly a logical solution, could be the last thing the country needs. A rapid and aggressive closure of these sites without viable alternatives would be deeply counterproductive. As of March 2025, over 32,000 asylum seekers were still being housed in hotels. A sudden closure would leave a significant number of people with nowhere to go, inevitably leading to a surge in street homelessness and destitution.

The use of hotels, despite being expensive—with the Home Office spending an estimated £170 per person per day, compared with just £27 for other types of accommodation—has served as an emergency "pressure valve" for the asylum system.

The primary alternatives—dispersed accommodation and large-scale sites—are already under immense pressure and are not a simple fix. Relying more heavily on private rental properties could further destabilise the housing market for existing tenants, while large-scale sites have faced criticism over their living conditions and potential to create social friction. The Epping court ruling demonstrated that closing a hotel can simply shift the problem and could lead to more widespread protests and community unrest. A sudden clampdown would replace a contained, albeit expensive, problem with a far more chaotic and damaging crisis, from which this Labour government may never recover, and which could undermine the party's standing with the electorate for a generation.

A more effective, albeit slower, solution would be to implement a comprehensive housing strategy that addresses both the immediate need for asylum accommodation and the systemic housing crisis. This could include:

1. Investment in Social Housing: A long-term plan to build a significant number of new council and social homes would alleviate pressure on both the private rental market and temporary accommodation services.

2. Court System Reform: As noted, an overhaul of the court system is essential to handle the potential increase in Section 8 eviction claims, ensuring the Renters' Rights Bill can be implemented successfully without causing a mass exodus of landlords.

3. Cross-departmental Coordination: Better coordination between the Home Office and the Department for Levelling Up, Housing and Communities to ensure asylum accommodation policies don't destabilise local housing markets.

4. Community-based Integration Models: Exploring and funding community-led initiatives that support the integration of asylum seekers, reducing reliance on large-scale, isolated sites and the private rental market.

The system, in its cold, bureaucratic logic, is working exactly as it's designed to—but what if the design is the problem? The choices made by politicians, landlords, and corporations are not abstract; they manifest as a family being handed an eviction notice, a child sharing a single room with their siblings, or a refugee being shuttled from one temporary site to the next. This crisis is not an inevitable force of nature; it is the direct result of human decisions. As taxpayers, as voters, and as citizens, we are all implicated in this design. The true measure of our society, therefore, may not be in the promises we make, but in the systems we allow to operate, and the human cost we are willing to pay for them.