Estimated cost of asylum accommodation treble what was expected, says watchdog

The cost of asylum accommodation is expected to be more than three times higher than previously estimated at £15.3 billion over 10 years, the public spending watchdog has said.

The National Audit Office (NAO) published a briefing into the Home Office’s contracts for housing asylum seekers on Wednesday to support an inquiry into the issue by the Commons’ Home Affairs Committee.

Original estimates from the Home Office for asylum accommodation and support contracts totalled £4.5 billion over the 10-year period for 2019-2029, the report said.

But, in 2024/2025, the current expected total stands at £15.3 billion over the same period, it said.

The watchdog said: “The Home Office’s total spend on asylum accommodation is more than planned and it has few levers to control costs.”

It added that the number of people seeking asylum housed in Home Office accommodation rose by 134% between December 2019 and 2024, from 47,000 to 110,000.

The watchdog said this was because of the increase in people arriving in the UK by crossing the English Channel and a rise in those claiming asylum who were previously detained under the Conservative government’s Illegal Migration Act 2023.

So far this year, more than 11,500 people have arrived in the UK after crossing the English Channel, a record number for the first five months of the year since data was first collected in 2018.

The report also detailed that those temporarily living in hotels accounted for 35% of all people in asylum accommodation, and for about 76% of the annual cost of contracts – £1.3 billion of an estimated £1.7 billion in 2024-25.

The findings come ahead of MPs preparing to question contractors Clearsprings Ready Homes, Serco and Mears about their role sourcing and managing asylum accommodation next Tuesday.

Reacting to the report, Home Affairs Committee chairwoman Dame Karen Bradley said: “Dealing with the cost of the asylum accommodation system remains a huge challenge for the Government.

“The NAO report reveals that the cost of these contracts is likely to be over three times what was envisaged when they were drawn up.”

On questioning providers, Dame Karen added: “We want to see why costs have risen so dramatically, but will also be looking at the quality of support that is provided, and will be challenging providers on failures to meet key performance indicators in recent years.”

The NAO’s report also said data from suppliers “suggests that hotels may be more profitable than other forms of accommodation”, while profit margins for contractors average 7% – which is within the Home Office’s original estimate of between 5-13%.

The watchdog also reported as of March 31 2025, the Home Office has taken £4 million off suppliers’ revenues – accounting for less than 1% – for reported underperformance since 2019.

It comes as the Home Office ended the use of supplier Stay Belvedere Hotels (SBHL), subcontracted by Clearsprings, after its performance and behaviour “fell short” of expectations.

Announcing the move in March, Home Office minister Dame Angela Eagle had also told MPs a full audit was being conducted of the supply chain.

Reacting to the latest estimate, Reform UK’s newest MP Sarah Pochin doubled down on plans for the party, who won control of a number of councils in the local elections, to “vigorously oppose” asylum accommodation.

“We will use every legal tool available including injunctions, judicial reviews, and planning laws to block the housing of asylum seekers in hotels in the areas we govern.” she said.

Meanwhile, 53 organisations providing frontline support to refugees and asylum seekers have written to Home Secretary Yvette Cooper urging for the management of asylum accommodation to be transitioned from private contractors to local authorities or third-sector organisations.

Conversation Over Borders, Refugee Action, Refugee Council and others have said the change should focus on “cost-effective, humane” housing solutions that integrate people seeking asylum into communities they are placed.

They added the public’s frustration over inadequate housing is “real and justified” but asylum seekers have been “unfairly blamed for the strain on these services” as they called for diverted investment into social housing for all.

Since the Labour Government came to power in July last year, 23 hotels have been closed while contracts were discontinued at three large sites, such as the Bibby Stockholm barge.

Napier Barracks in Folkestone, Kent, is also due to close and be returned to the Ministry of Defence in September.

Responding to the NAO’s findings, a Home Office spokesperson said: “As this report shows we inherited an asylum system in chaos with tens of thousands stuck in a backlog, claims not being processed and disastrous contracts that were wasting millions in taxpayer money.

“We’ve taken immediate action to fix it – increasing asylum decision-making by 52% and removing 24,000 people with no right to be here, meaning there are now fewer asylum hotels open than since the election.

“By restoring grip on the system and speeding up decision making we will end the use of hotels and are forecast to save the taxpayer £4 billion by the end of 2026.”