Contractors working for the Home Office are offering landlords five-year guaranteed full rent deals to take over the management of properties as they race to transfer asylum seekers out of hotels.
The properties, drawn from the private rental and social housing markets, are being used to house more than 58,000 asylum seekers across England, Wales and Scotland – double the number in so-called “dispersed accommodation” a decade ago.
Insiders told Planet Normal that the Home Office was expanding its use of rented accommodation to meet Rishi Sunak’s pledge to reduce the use of hotels, which have been costing up to £8 million a day. Fifty asylum hotels were due to shut by the end of last month with a further 50 closed by the spring.
Until the end of last year, there were about 50,000 asylum seekers in 400 hotels paid for by the taxpayer. Putting up asylum seekers in dispersed accommodation can cost as little as £30 a day, compared with £150 a day for hotels.
However, experts advising the Home Office have warned that local families and young workers face being deprived of cheaper rented accommodation.
A Home Office insider said: “The department’s strong preference is for dispersal accommodation because it is so much cheaper and much more discreet than hotels. That’s not to say it’s not unpopular.
“Some of the contractors are taking properties in pretty normal streets. You can buy yourself a £300,000 house and suddenly find your next-door neighbour is a house full of asylum seekers. MPs are starting to report problems as a result of this.
Scheme ‘creates ghettos’
“It has also been very heavily clustered in places where property is cheap – Hull, Bradford and Teesside. It is potentially damaging to these places because it creates ghettos which are terrible for integration.”
The Telegraph understands that as many as 30,000 properties may be needed to end the use of hotels unless the Government can substantially reduce the 100,000 backlog of asylum seekers waiting for a decision on whether they can remain in the country.
“There is a shift away from hotels to putting people into housing which on one level is not a bad idea but on another level, on the scale it is being done, is going to have quite a significant impact in areas where it is being done at scale,” said one insider.
“That’s 16,000 properties that would normally be available to families looking for somewhere to rent and live, and often to get themselves off the local housing register.”
There were 1.2 million people registered on council house waiting lists at the end of 2021-22, up from 1.19 million in 2020-21.
The contractors behind the scheme – Serco, Clearsprings and Mears – have been paid £4 billion over 10 years to provide accommodation to asylum seekers.
Serco promotes the benefits to landlords as five-year leases with “rent paid in full, on time, every month, with no arrears”, as well as full repair and maintenance, except for structural defects.
Utilities and council tax bills are also paid under the contracts, which offer “full Houses of Multiple Occupation and property management” and no letting or management costs.
With more than a third of UK landlords experiencing rental arrears a year, one housing expert close to the project said the deals were highly attractive. “If you’re a landlord, wouldn’t you take a five-year contract where they’re going to pay all the rent regardless,” they said.
A Home Office spokesman said: “We continue to work across government and with local authorities to identify a range of accommodation options to reduce the unacceptable use of hotels which cost £8 million a day. The government remains committed to engaging with local authorities and key stakeholders as part of this process.”
The spokesman refused to comment on the figures but said: “We are working to procure sufficient dispersal accommodation to meet our statutory obligation.”
Enver Solomon, chief executive of the Refugee Council, said: “The Government’s gross mismanagement of the asylum system has led to immense human misery, with people left in limbo for years on end in a huge backlog of cases resulting in billions being wasted on hotels and other accommodation.
“It would not be like this if the Government focused on operating a fair, efficient and effective system instead of the Rwanda plan that will only lead to more cost and chaos.”