London Councils has blamed ‘increased homelessness rates' for the failure of a company formed to procure properties to tackle the issue.
It comes after an evaluation of Capital Letters, which was formed in 2019 but was forced to close last year, found it was ‘over optimistic to the point of being unrealistic' about the commitment of councils involved to the firm and its ability to buy properties.
It had been assumed that councils involved would transfer their private sector leased stock, but this failed to happen. There was also a reluctance by councils involved to transfer procurement staff to the entity amid a ‘varying commitment of boroughs' and it was hit by ‘adverse market conditions' in the property market.
While at its peak Capital Letters involved more than 20 councils, by 2025 this had been halved.
The evaluation said the company began to adopt a ‘deliberate strategy of having fewer, more active members' as its larger membership ‘caused administrative and governance issues'.
A spokesperson for London Councils, which coordinated the creation of the firm, said ‘immense turbulence' in the capital's private rental sector following the Covid-19 pandemic, rent increases and a fall in available properties ‘increased homelessness rates and made it even harder to procure accommodation'.
Despite Capital Letters' collapse London Councils insisted boroughs continued to be committed to working together to ‘take forward new initiatives and collaborations to prevent homelessness from occurring in the first place'.
The spokesperson added: ‘While London needs a vibrant private rented sector, it is clearer than ever that over-reliance on a volatile private rented sector for addressing homelessness is holding us back from finding sustainable solutions to the housing emergency.'
Some £26m was invested by the Ministry of Housing, Communities and Local Government (MHCLG) to help create the company, which had been expected to become self-sustaining.
An MHCLG spokesperson said: ‘Everyone deserves a safe place to call home, which is why we are doing everything we can to turn the tide on homelessness and the housing crisis through sustainable longer-term funding.'
