UK: Backlogs in asylum processing and chronic housing shortages have pushed hotels to the centre of the UK’s asylum accommodation system. With a 2029 deadline in place, the hospitality industry questions how realistic this transition is.
By 2029, the UK government has pledged to end the use of hotels to house people seeking asylum. The Home Office has declared that it is exploring a variety of short, medium and longer-term alternatives to hotels and the commitment has been framed as both a cost-saving measure and a reset of a system long under strain.
Yet behind that headline promise lies a far more complicated reality. While the deadline appears straightforward on the surface, the realities behind it paint an uncertain future.
The scale of the challenge is significant. As of September 2025, more than 36,000 asylum seekers were being housed in hotels, a figure that has risen steadily in recent months and represents a 13 per cent increase since June 2025. Behind that growth sits a wider backlog of around 80,000 unresolved asylum cases, which has extended the length of time people spend in temporary accommodation and intensified reliance on hotels.
In the UK Budget Review, the Office for Budget Responsibility (OBR) recently flagged that spending on asylum accommodation is projected to reach £15.3 billion over the next decade as a result of a rise in the number of asylum seekers arriving by small boat, compared with its estimation of £4.5 billion made in 2019. The significant rise is driven by an increase in the total number of migrants who crossed the English Channel in small boats in 2025, which rose to 41,472 – almost 5000 more than the previous year.
The government says it has removed 50,000 illegal migrants and that they have taken steps to work closer with the French government and to reform the asylum process. While ministers point to falling small-boat arrivals and increased enforcement activity, the cost of accommodation continues to climb.
The Home Office maintains that faster decision-making and a move towards alternative accommodation will reduce reliance on hotel-based provision. According to the University of Oxford’s independent research centre, Migration Observatory, this could save the taxpayer at least £1 billion a year by 2028-29, with hotels costing on average six times more than other forms of asylum accommodation.
Ministers say the shift will involve working closer with local authorities as part of a move towards a full dispersal model. While the model has been in place since 2023, its effectiveness has been limited by planning constraints, housing supply pressure and local capacity, meaning a complete transition is likely to be gradual.
The hospitality sector warns that the structural conditions needed to make this shift are not yet in place. The rising number of people entering the asylum system, the shortages of suitable accommodation, the impact of lengthy planning processes and fatigue of years of underinvestment in housing supply, has exacerbated pressure on hospitality and accommodation sectors, exposing a gap between political ambition and delivery.
How we came to rely on hotels
Hotels have traditionally sat on the margins of the asylum system, used sporadically for short-term accommodation. Since the pandemic however, that reliance has deepened. “There have always been elements of hotels being used for asylum seekers,” said Simon Barry, director at UK planning consultancy Boyer.
He notes that the issue has become increasingly politicised, shaped by public perception as much as by policy. “You have to balance that against affordable housing needs for the local population,” he says. “That balance is difficult both politically and from a planning perspective.”
One multi-site hospitality operator, who has experience working with local authorities, says that the certainty of guaranteed occupancy was likely to be attractive and lucrative to hotel operators dealing with a post-pandemic slump back in 2020. “If you can guarantee 100 per cent occupancy for two or three years, you can see why that would be attractive.”
The operator warns that hoteliers considering asylum accommodation contracts will need to weigh up the long-term commercial and reputational implications that may arise once those arrangements come to an end. Operators will need to consider a range of strategies to replace the loss of guaranteed income. Some may need to reposition hotels towards lower-cost and longer-stay models with the aim of attracting a wider range of clientele who require accommodation at a more affordable price over extended periods to help stabilise occupancy. Others might shift towards more price-sensitive segments, accepting lower average daily rates.
Drawing on their experience with council-led contracts, the operator says the financial outcome depends heavily on how the asset is positioned. “If you treat it as a budget hotel, it’s a win. If you treat it as an upscale hotel, you lose money, because you should be able to achieve a much higher rate.”
Reputational impact is another key consideration. In some cases, hotels may need to effectively relaunch once contracts end. “We rebranded and moved to an international brand to ramp business back up as quickly as possible,” the source explains. While recovery proved possible, it came at a cost. “Costs are higher, ADR is higher,” the operator says. “But you’re paying franchise fees and commissions, and you’re investing heavily in marketing to rebuild the brand.”
These concerns are often accompanied by wider disruption within local communities. Over the past year, protests have taken place outside a number of asylum hotels across England, Wales, Scotland and Northern Ireland, reflecting heightened public tensions. There is also a sense of fear among local hospitality business owners regarding the impact of protests and security concerns on trade and footfall. Just recently in Southampton, for example, a restaurant connected to Highfield House Hotel (a hotel housing asylum seekers) closed earlier this month after more than 20 years in operation, citing a prolonged drop in custom. The business said trading had become “almost impossible”, pointing to public unease and repeated protests in the area as key factors affecting demand.
The human reality
One consequence of long-term hotel use to house asylum seekers that is often overlooked is the impact that this has on those seeking accommodation. Erica Wilson, refugee and asylum seeker manager at Refugee and Migrant Forum of Essex and London (RAMFEL), says that living conditions themselves can also be difficult. “There’s no privacy, no space for children to play or do homework, and no sense of normal family life.”
The length of time people spend in temporary accommodation only compounds these issues. “We’ve worked with families who have been in hotels for two years or more. That level of uncertainty, combined with limited space and lack of autonomy, has a real impact on mental health,” Wilson shares. What was originally intended as a short-term solution has, she adds, become increasingly normalised. “Hotel accommodation was originally intended for a few days, but now it’s become normal for people to be left there for long periods, sometimes for the entire length of their asylum claim.”
This prolonged reliance on hotels links to the broader pressures that are impacting the system. Due to a backlog in asylum claim processing following the pandemic, combined with wider housing shortages, hotels have come to account for a significant proportion of overall asylum accommodation spending. According to a briefing by the National Audit Office, £1.3 billion out of an estimated £1.7 billion in the first seven months of the 2024-25 financial year was spent on Asylum Accommodation and Support Services Contracts (AASC) to house asylum seekers in hotels. Although just over a third of people in the asylum system are accommodated in hotels, these placements account for more than three-quarters of total accommodation contract costs, underlining the higher expense of hotel-based provision compared with other forms of housing. In the same financial year, hotels accounted for £2.1 billion out of the UK’s total asylum spend of approximately £4 billion, representing a decrease from £3.1 billion in the previous year.
At the same time, the government has highlighted its intention to challenge the profits generated through asylum accommodation contracts. In the 2025 Budget announcement, Chancellor Rachel Reeves said the government would ‘claw back’ the excess returns made by hotel operators. The ‘excessive profits’ highlighted by the government are however the result of the long-term contracts that were issued by the Home Office itself. In 2019, the Home Office awarded 10-year AASC contracts to three main providers: Clearsprings Ready Homes, Mears Group and Serco. To some in the hospitality sector, this has created a conflicting narrative whereby hotel operators are encouraged to support asylum accommodation through the issue of government-backed contracts while the government simultaneously frames hotels as generating excessive returns.
“Hotels are extremely expensive for what families actually get,” Wilson adds. She notes that the same providers responsible for hotel accommodation are often also contracted to supply dispersal housing, which is more suitable in the long term. “What we’re likely to see is more interim accommodation, such as military barracks,” Wilson says. “For us, the concern is not simply whether hotels will end, but what the alternative is going to be and whether it genuinely offers people stability.”
Planning and politics
At the centre of the issue are the structural and legal complications that arise when considering how long the current system can feasibly continue. While many hotels are operating under government-issued contracts and guidance to provide asylum accommodation, those arrangements do not automatically override local planning controls.
Faraz Baber, COO of multi-disciplinary consultancy Lanpro Group, uses the High Court ruling relating to the Bell Hotel in Epping as an example of how existing planning tools are struggling to keep pace with the realities of the system.
In this case, the High Court denied Epping Forest Council’s bid for a permanent injunction, ruling that the use did not amount to a serious planning breach. Baber, who also sits on the London Housing Mission board, says: “The court found that the Home Secretary’s requirement to house asylum seekers carried greater weight than the alleged planning and environmental harm. What the court made clear is that an injunction was not the appropriate mechanism, but it did not close the door on planning enforcement.”
Hotels operating under asylum accommodation contracts now sit in a grey area, caught between central government policy and locally enforced planning law. “The planning door remains open, and that leaves uncertainty for hotels between now and 2029,” Baber explains. “Hoteliers housing asylum seekers should consider applying for retrospective planning permission if they haven’t already, to reduce the risk of enforcement action.”
That uncertainty is compounded by the lack of national direction. “The question that has to be asked is why the government has not amended the C1 use class or issued a ministerial statement to allow temporary accommodation,” Baber adds. Barry [director, Boyer] says this ambiguity is already shaping how local authorities respond. “It often comes down to the argument around unlawful change of use from a C1 hotel use to something more akin to a hostel,” he explains. “Local authorities have been trying to argue that hotels being used for asylum seekers are no longer functioning as traditional hotels.”
The ripple effects
Concern that pressure is being redirected across other accommodation markets is growing across the hospitality sector. “If hotels are ruled out, does it move to Airbnbs, private rentals, or housing associations?” says Barry. “Each of those options has knock-on effects for the housing and rental market.”
The government plans to shift to alternative accommodation such as military sites, barges, student accommodation, government-owned housing and HMOs. Concerns around the credibility of this move are compounded by the scale of the housing shortfall that underpins any transition away from hotels.
There is concern around how exactly those alternative accommodation markets will absorb pressures in practice. Hostels, B&Bs, housing associations and council housing are typically used to address homelessness and for providing emergency accommodation – often operating from an already constrained supply. In fact, as of mid-2025, there were over 132,000 households in England in temporary accommodation.
“We need to build 1.5 million homes nationally, and we are unlikely to build even 50 per cent of that,” Baber says. “In London, we are meant to build 88,000 homes a year, but only around 5,000 have been started this year.” Against that backdrop, Baber questions whether sufficient alternative accommodation can realistically be delivered within the remaining timeframe. “The idea that we will find immediate housing supply for asylum seekers between now and 2029 is very difficult to see,” he adds.
“By 2029 the government has committed to closing asylum hotels, but the reality is that asylum seekers will still need to be housed somewhere,” he says. In practice, he adds: “HMOs are currently the default alternative, alongside attempts to use MOD sites.”
That shift brings its own risks. “Landlords can secure five-year fixed agreements with Home Office providers, which creates an incentive to convert family homes into HMOs,” Baber explains. “That creates the oxymoron where families in private rented accommodation may be displaced.” Crucially, Baber stresses that alternatives cannot be delivered overnight. “Any plan to rehouse asylum seekers will take time, potentially 18 to 24 months just to build new sites,” he says. “They need to be thinking now about what that provision looks like and where it will be.”
Evidence of spillover into other hospitality markets is already emerging within the serviced apartment and aparthotel sector. One aparthotel operator describes how two apartment bookings made via Booking.com were later revealed to be for refugee housing, arranged by the local council. “It was a very unusual way of doing it, especially when you hear about hotels not working with the government unless it’s a formal corporate contract,” they explain.
The operator says the details were not disclosed in advance, leaving them with little visibility or control over who was occupying the units. “I don’t think it’s the OTAs’ fault, because how would they know?” they say. “But I would have expected the council to contact the operator directly and explain that they were relocating people.”
They add that the lack of communication created operational challenges. “That lack of communication was what we found unusual”, noting that the apartments were damaged and there was limited ability to manage the bookings in the way they would under a conventional commercial arrangement. For the operator, the experience highlighted the need for clearer frameworks as demand spills beyond hotels. “There needs to be proper engagement from councils with operators and with the industry more broadly,” they say. “There should be standardised contracts and booking processes.”
Arguably, this is not an isolated incident; it is one that relates to wider concerns about how demand is realistically going to be absorbed by 2029. Some in the sector say that spillover into alternative markets is exposing much deeper structural pressures and an imbalance in the market where demand consistently outweighs supply.
Property expert and founding partner at Lauder Teacher, Andrew Teacher, says that these issues are reflective of a wider market distortion rather than an asylum accommodation issue. “It will affect costs as a simple result of the state spending huge sums in the sector,” he says. “In practice this means the government driving demand inelastically and by extension allowing costs to rise substantially in certain areas.”
At a local level, Teacher warns this can intensify pressure on councils’ existing statutory obligations. “Local authorities will likely see increased pressures take hold as beds that otherwise could have gone on temporary accommodation are instead repurposed for asylum seekers,” he explains. More broadly, he argues that investment conditions are compounding the problem. “Unnecessary restrictions are making investment in large parts of the country unviable, consequently affecting asylum accommodation,” Teacher says, adding that the underlying issue remains one of supply and demand. “The problem in this case is a supply-demand imbalance rather than a specific asylum seeker one.”
What can we expect from 2029?
The government’s commitment to ending the use of hotels for asylum accommodation by 2029 has been positioned as a clear endpoint. But questions remain over whether the deadline reflects a credible plan that can be delivered sustainably across the hospitality and accommodation sectors.
Teacher says that the deadline has done little to reassure the market. “The deadline has undermined confidence in the government’s seriousness about delivery because the ambition is so far out of sync with both the reforms promised, and the reforms actually being delivered,” he says. For many operators, the concern is not the principle of moving away from hotels, but the absence of the conditions needed to make alternative options work at scale.
Uncertainty is shaping sentiment across other accommodation sectors. Stephen Lowy, CEO of AES, The Residence Apartments, Jitaku Aparthotels and Umi Digital, says: “In reality, the infrastructure to support rehousing people from hotels into serviced apartments, student accommodation, or other forms of housing just isn’t clear.”
Lowy adds that reputational risk is compounding the challenge for operators weighing up future involvement. “Negative media coverage has already had an impact,” he says, noting that heightened scrutiny and public backlash risk inflating the commercial and brand challenges operators may face as the deadline approaches.
Given these pressures, there is concern that governments may act quickly to clear backlogs and ease housing pressures by placing asylum seekers into alternative forms of accommodation, without sufficient consideration of suitability. However, charities warn that dispersal models are critical, and that suitability should remain at the forefront of the government’s approach. Wilson [manager, RAMFEL] says alternatives need to be procured with greater care. “They also need to procure more suitable accommodation and stop relying on hotels,” she says. “Minimum standards need to be enforced, and people need proper channels to raise complaints when accommodation isn’t suitable.”
A deadline or a solution?
Taken together, the government’s commitment to ending the use of hotels for asylum accommodation has created a political deadline that intersects with wider pressures on the housing and hospitality sectors. While ministers have set out plans to expand the dispersal model, questions remain over whether existing structures and funding mechanisms are sufficient to support a transition at scale, particularly as demand for suitable accommodation continues to outpace supply.
The deadline points to a system that has been grappling with significant social and economic pressures since the onset of the pandemic. The asylum accommodation challenge has, in turn, highlighted longstanding constraints within the housing system, with the prolonged reliance on hotels emerging less as a long-term solution and more as an indicator of deeper structural issues.
Unclear planning frameworks, alongside limited coordination between central government, local authorities and the hospitality sector, have contributed to hotels becoming a default option in some areas, often with limited consideration of the wider implications this carries for both the industry and for those seeking asylum.
Without viable alternatives in place, and in the absence of a broader resolution to the country’s housing shortages, there are concerns that phasing out hotels could shift pressure rather than resolve it. As hotels are withdrawn from use, that strain may instead be absorbed by HMOs, housing supplied by the ministry of defence for armed forces, serviced apartments, temporary accommodation and private rentals, raising further questions around suitability and long-term sustainability.
Across the sector, operators, charities, planning and property experts point to a shared set of challenges shaping the transition. Therefore, clearer planning guidance, enforceable standards and meaningful collaboration between the government, local authorities and hospitality sectors is integral, or else the 2029 deadline risks becoming a pressure point rather than a clear pathway for change.
The question, then, is not simply whether hotels will exit the system on schedule, but whether the conditions will exist to realistically support that shift at a national level and in a way that responds effectively, sustainably and humanely to the issue at hand.
Sources and further reading:
https://researchbriefings.files.parliament.uk/documents/SN01403/SN01403.pdf
https://www.bbc.co.uk/news/articles/c70989jrdweo
https://migrationobservatory.ox.ac.uk/resources/briefings/asylum-accommodation-in-the-uk/#:~:text=In%20the%20financial%20year%202024,Click%20to%20read%20more.
https://www.gov.uk/government/statistics/statutory-homelessness-in-england-april-to-june-2025/statutory-homelessness-in-england-april-to-june-2025#:~:text=period%20last%20year.-,5.,the%20same%20period%20last%20year.&text=132%2C410%20households%20were%20in%20temporary%20accommodation%20on%2030%20June%202025,24.8%20households%20per%201%2C000%20households.
https://www.nao.org.uk/wp-content/uploads/2025/05/home-offices-asylum-accommodation-contracts.pdf
https://www.ramfel.org.uk/uploads/1/1/8/6/118604888/rmj001_profiting_from_people_report_v5.pdf
https://lordslibrary.parliament.uk/asylum-accommodation-support-use-of-hotels/#:~:text=The%20National%20Audit%20Office%20(NAO,programme%20by%20end%20March%202024.
https://questions-statements.parliament.uk/written-questions/detail/2025-03-24/40499
https://www.ramfel.org.uk/uploads/1/1/8/6/118604888/rmj001_profiting_from_people_report_v5.pdf
