Dramatic Drop in UK Asylum Hotel Costs: What’s Behind the 30% Cut?

The UK government has reported a significant 30% reduction in expenditures for housing asylum seekers in hotels, spending £2.1 billion from April 2024 to March 2025, down from £3 billion the previous year. This translates to an average daily cost of about £5.77 million, down from £8.3 million. Key to this saving is the reduction in average nightly costs achieved through the utilization of cheaper accommodations and increased room sharing.

Despite these savings, experts like Dr. Peter Walsh from the Migration Observatory caution that the rise in small boat crossings could lead to a continued reliance on hotel accommodations, as there were 32,345 individuals in asylum hotels by the end of March 2025, indicating a growing trend from the 29,585 recorded in June 2024.

A senior Home Office official clarified that a significant part of their cost-cutting strategy involved transferring asylum seekers to more affordable housing options, such as houses in multiple occupation (HMOs), where at least three individuals share bathrooms and kitchens. This shift was facilitated through contracts with Serco, which oversees many aspects of asylum accommodation. Cutting costs further, the Home Office renegotiated various contract terms originally set by the previous Conservative government.

From March 2023 to March 2025, the average nightly cost per person dropped to £118.87, demonstrating effective cost management. While the number of hotels utilized decreased from 273 to 202, the average occupancy situation—where room sharing allowed individuals to double or triple up—remains somewhat ambiguous.

Additionally, the Home Office report noted a constructive loss of £48.5 million tied to the cancellation of an asylum accommodation plan at RAF Scampton by the Labour government and the £270 million spent on a scrapped agreement to send asylum seekers to Rwanda. The aspiration of using Rwanda as a deterrent for Channel crossings has faced obstacles due to legal challenges, and reports confirm only four individuals were sent to Rwanda voluntarily. The Rwandan government has stated it is under no obligation to refund the funds in light of the plan’s cancellation.