Migrant Hotels to Cost Taxpayers Millions as Government Struggles to Reduce Spending

The use of hotels to house asylum seekers is set to continue for years, according to a recent Treasury report. The government has attributed this to ongoing global instability, which has led to an increase in illegal migration. Efforts to reduce costs have so far failed to mitigate spiralling expenses, with the Home Office spending £5.5 million per day to accommodate migrants in hotels.

Data reveals that over 38,000 asylum seekers now reside in hotels, costing taxpayers £145 per night per individual. This is significantly pricier than dispersal accommodation—such as shared houses, flats, or bedsits—which costs only £14 per night. Despite earlier pledges to curtail such expenditure, including former Labour leader Sir Keir Starmer’s promise to end asylum hotel use, the issue appears far from resolved.

Trevor’s Office for Value for Money (OVfM) highlights how private contractors managing hotel bookings have profited significantly. The three main contractors—Serco, Clearsprings Ready Homes, and Mears—have seen profits rise, in part fuelled by increasing demand. For instance, Clearsprings reported record profits of £50 million last year. Moreover, Serco recently announced a 5 per cent jump in group-wide profits to £249 million.

The government signed long-term contracts worth £4.6 billion with these companies back in 2019. However, the contracts were not designed to accommodate the current crisis, and a break clause within these agreements has yet to be triggered. Home Office insiders have indicated there are no immediate plans to renegotiate or terminate these deals.

Concerns have also been raised about middlemen subcontractors, such as Stay Belvedere Hotels (SBHL), who handle a large portion of the bookings. Investigations suggest that many of these entities operate without proper oversight, leading to accusations of profiteering amid the migrant crisis. A report by the Institute for Public Policy Research found taxpayer costs per asylum seeker had surged from £17,000 in 2020 to £41,000 by 2024.

In an effort to address the escalating financial burden, the government has committed to ending the reliance on hotels as asylum accommodation. Steps include restarting claims processing and exploring alternatives such as large-scale housing developments. However, challenges around housing supply and infrastructure persist, with the Treasury report indicating that temporary accommodation for asylum seekers may remain unavoidable for several years.

The OVfM is working alongside departments, local councils, and private firms to establish a more structured approach to managing accommodation expenditure. The ultimate goal, according to government officials, is to achieve better financial efficiency while also reducing the humanitarian impact on vulnerable migrants, particularly families with children.