Councils across England paid private landlords at least £1.25bn last year for temporary accommodation, including hostels and bed and breakfasts, as rising numbers of people faced homelessness.

Including council-owned properties, total spend on temporary accommodation – which is often cramped or sub-standard – reached almost £1.6bn.

MPs and housing groups said the bill for short-term accommodation, revealed on Thursday by the government’s ‘levelling up’ department, showed a broken system.

Temporary accommodation is meant to be a short-term measure. But many families report being stuck in this type of housing for months if not years, including tens of thousands of children.

The 2021/22 figure of £1.58bn is a 29% increase from pre-pandemic 2019/2020 figures.

In the last year, £365m was spent on bed and breakfast accommodation alone, which should be used only as a last resort, according to the Department of Levelling Up, Housing and Communities (DHLUC)’s homelessness guidance, while a further £65m was spent placing people in hostels.

“These shocking figures are the result of 12 years of failure by consecutive Conservative governments, with local councils and residents picking up the bill,” said shadow local government minister Sarah Owen MP. “It should shame ministers that families are stuck in cramped, sub-standard temporary accommodation and that so much taxpayers’ money is going to private landlords.”

Local councils have a legal duty to provide shelter for most homeless families until they can find a suitable home. Increasingly, councils must turn to private temporary accommodation to house those facing homelessness as those families are likely to wait years to access a very small amount of social housing, which has been depleted by the mass selling off of council housing under Right to Buy in the last four decades.

This week, research from Heriot-Watt University and homelessness charity Crisis showed that significantly more government expenditure goes on temporary accommodation than preventative or supportive services.

Tenants’ rights organisations say the outsourcing of duties to house those who are homeless before they can find permanent accommodation has allowed private landlords to hold councils to ransom.

“Prior to the selling off of social housing, a homelessness application would see you in a council or housing association property,” Ben Reeve-Lewis, co-founder of Safer Renting, told openDemocracy. “Now, ironically, many of those social homes are now in the hands of private landlords being let back to the local authority at increasingly higher rent.

“Part of the problem is that unscrupulous landlords – and there are many – will raise the rent, causing the council to top up the shortfall with discretionary housing payment to keep the tenant in their home, effectively holding councils to ransom.”

Labour said it would help tenants and reduce homelessness should it get into power after the next election.

“From ditching housing targets to renters’ reforms, we have seen a string of broken promises from the Tories on housing,” said Owen. “Labour will scrap section 21 notices [so-called ‘no fault’ evictions], build more affordable housing and restore social housing to the second largest form of tenure.”

A spokesperson for DLUHC said: “Temporary accommodation is a last resort, but a vital lifeline for homeless families and those at risk of sleeping rough.

“We are giving councils £366 million this year to prevent homelessness and help ensure families are not left without a roof over their heads.”