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Accommodation for asylum seekers is expected to cost more than £15bn, three times the amount the Home Office originally estimated, according to the latest figures.
The Conservative government signed contracts in 2019 that were due to pay £4.5bn of taxpayers’ money to three companies over a decade.
However, a report by the National Audit Office, the government spending watchdog, says that number is now estimated to be £15.3bn over the 10-year period.
The report was requested by parliament’s cross-party home affairs committee, which is conducting an inquiry into asylum accommodation and was published on Wednesday.
For the first time the report also publishes a detailed breakdown of profits for all three asylum accommodation providers – Clearsprings, Serco and Mears.
It shows that the three companies made a total profit of £383m on the contracts between September 2019 and August 2024. The deal is due to run until 2029.
The Home Office can deduct money from its contractors for breaches but to date has deducted less than 1% from its accommodation contractors. It does not measure performance of its large accommodation sites such as Napier barracks in Kent and Wethersfield in Essex.
In 2024/5, hotel accommodation accounted for 76% of the annual cost of asylum contracts but provided housing for just 35% of asylum seekers supported by the Home Office.
Hotel accommodation for asylum seekers increased sharply at the start of the pandemic. The current government has pledged to end its use but according to the NAO report at the beginning of this year 222 hotels were still in use accommodating 38,000 people. The estimated cost of shared housing per person per night is £14.41 while the equivalent cost for a night of hotel accommodation for one person is £145.
Hotels have been targeted by the far right, including during last summer’s riots. Asylum seekers, who are offered Home Office accommodation on a no-choice basis, report that they often feel like prisons.
Other issues identified in the report include up to 4,000 referrals a week to the Home Office’s safeguarding hub including more than 700 notifications of urgent or serious incidents including deaths between July 2024 and January 2025.
The home affairs committee will question asylum accommodation providers as part of its inquiry into asylum accommodation on 13 May.
Dame Karen Bradley, chair of the committee, 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.
“Next week we’ll be speaking to providers to understand their role in sourcing and managing accommodation for asylum seekers. 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.”
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 £4bn by the end of 2026.”
