The next opportunity for BTL: Asylum seekers and vulnerable tenants? – Ganatra

In the fiscal year 2023/24, the Home Office’s spending on the asylum system reached a record £5.38bn, marking a 36% increase from £3.95bn in 2022/23. A substantial portion of this expenditure is attributed to hotel accommodation. As of early 2025, the cost of housing asylum seekers in hotels is approximately £5.5m per day.

As of December 2024, approximately 38,079 asylum seekers were housed in hotels across the UK. In addition to hotels, the government utilises dispersal accommodation, which includes self-contained properties let by private landlords.

As of early 2025, around 66,000 asylum seekers were residing in such accommodation.

Combining both hotels and dispersal accommodations, over 110,000 asylum seekers are currently being housed by the government.

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Sharing the responsibility with the private rental sector 

The Home Office has outsourced asylum housing to three main contractors: Serco, Clearsprings Ready Homes, and Mears. Between September 2019 and August 2024, these companies made £383m in profits from these contracts.

These contractors are mopping up private rented accommodation and paying over market rent to secure rental stock. 

We’ve seen this ourselves recently in Milton Keynes, as market rent for a three-bed in an average area is circa £1,400 pcm – but these government contract providers are taking these on five-year leases for £2,000 pcm. 

The direction of travel is that the government aims to reduce reliance on hotel accommodation by 2029, with plans to save £4bn by 2026 through improved claim processing and transitioning to more cost-effective housing solutions.

The challenge is that most buy-to-let (BTL) lenders are cautious around lending on these commercial tenancies due to many factors. Some of the key factors are the reputational damage it would cause lenders if they had to evict tenants, the oversight and maintenance of their security to ensure they aren’t being poorly looked after and the wording of the commercial agreements between the landlord and tenants.

If these concerns can be addressed, many more properties could be made available, helping landlords with stable and high-yielding tenancies and helping lenders to tap into an under-served sector. Along with the potential ability to achieve higher margins due to the perceived risk profile, as well as the yields possible for the landlords. 

It could also serve the government equally as well by helping them to reduce the staggering amount they are spending currently on hotels. 

Statistics are openly available from the government for lenders and landlords to assess the opportunity.

Could the government look to underwrite the risks the lenders are taking? Maybe, but in the meantime, could more be done anyway by lenders to open up this type of tenant to more landlords – I think so.