A plan for councils to provide new homes for asylum seekers has been halted by ministers amid concerns over costs, The i Paper has learnt, in a potential blow to Andy Burnham’s plan to shut asylum hotels.
The Government scheme would have seen ministers give town halls funding to buy or build properties for migrants awaiting decisions on leave to remain, which would be added to the country’s social housing stock.
But Whitehall sources told The i Paper the pilot programme has been halted with the Treasury questioning its value for money, and the housing department raising concerns about existing pressures on social housing including long waiting lists.
Home Secretary Shabana Mahmood has now switched her focus to moving asylum seekers out of hotels into large sites such as military bases, The i Paper understands, as the Government continues efforts to bring down Channel small boat crossings – a major route for those seeking asylum in the UK.
Burnham could yet revive plans
The failure of the scheme to get off the ground will raise fresh questions about Burnham’s apparent plan to rip up multi-billion-pound asylum hotel contracts and make councils house asylum seekers in a bid to defuse anger over the use of more expensive accommodation.
Burnham is expected to be confirmed as the UK’s new Prime Minister next week following the resignation of Sir Keir Starmer.
Experts previously told The i Paper that Burnham’s plan could be unworkable, saying that the difficulties surrounding the pilot may cause problems for incoming prime minister.
Jacqueline Broadhead, director of the Global Exchange on Migration, at the University of Oxford, said the difficulties facing the pilots meant “an immediate move away from the current system may be difficult to implement”.
It also risks a collision course with Labour MPs who are rebelling over the Government’s asylum and immigration policy.
A private letter from nearly 80 MPs to Burnham expressing concerns about Mahmood’s hardline policies, obtained by The i Paper on Thursday, called for the council plan to go ahead.
One Whitehall source said that Burnham could yet reactivate the plan, but the difficulties the scheme has run into, with a proposed pilot at Newcastle City Council pulled amid concerns over cost, may make this more difficult.
Around 200 local authorities expressed an interest in joining Asylum Dispersal Pilots as part of the Government’s plan to move away from paying private contractors for taxpayer-funded migrant hotels, which between April 2024 to March 2025 cost £2.1bn.
A smaller number of councils had been chosen to take the scheme forward after £500m in Government funding was allocated for the new asylum accommodation model.
But several told The i Paper they had heard nothing about the scheme recently, with one senior council source suggesting it had “gone cold”.
‘Committed to closing every asylum hotel’
A Government spokeswoman said: “We have committed to closing every asylum hotel, and work is well underway, with more suitable sites, including military bases, being brought forward to ease pressure on communities.
“The Home Office is working with MHCLG [Ministry of Housing, Communities and Local Government] to explore a model of asylum accommodation that achieves value for money and supports asylum system reform. Further detail will be provided in due course.
“New council housing will not be used by illegal migrants under any circumstances.”
Around £4bn was spent on supporting asylum seekers in the year ending March 2025, according to the Home Office, £2.1bn of it on hotels.
By March this year, there were 93,653 asylum seekers in taxpayer-funded accommodation, with around 22 per cent – 20,885 – in hotels. The average nighty hotel cost is £144 .
The average nightly cost of housing an asylum seeker for private-rented temporary accommodation – often Houses in Multiple Occupation – is £23.25.
The Home Office last week announced plans to use three more military bases to house thousands of asylum seekers as it looks to move away from hotels.
Burnham’s team were approached for comment.
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