The project run by Right There provides two accommodation units in Pilton and one in Broomhouse, supporting 44 people who live with the consequences of family breakdowns, homelessness, poverty, addiction, and many other challenges.

The charity said the decision is its “absolute worst-case scenario” and “a last resort”, with the jobs of 19 support workers now at risk.

According to Right There, the local authority is “refusing” to pass on its uplift in housing benefit to increase the Housing Management Payment, which it said has remained unchanged since 2019 despite the cost of living skyrocketing in that time.

The charity said the local authority should use the increased housing benefit to help providers deal with the increased costs of running an assisted housing programme.

Janet Haugh, CEO of Right There, said: “We are devastated that we are having to pull the plug on this service, this is our absolute worst-case scenario, especially when Scotland is at the brink of a national housing crisis. We have done everything in our power to resolve this with the council but sadly as a charity, we simply cannot absorb a projected £2.5 million deficit over the next five years and continue running this service.”

Ms Haugh added: “We have exhausted all avenues with the council and bringing the contract to a conclusion by triggering the three months’ notice period is our last resort. Our priority now is to work with the council to hand over the running of the programme to either the local authority or another provider to ensure as much continuity and as little distress as possible for the 44 residents affected, and the support workers whose jobs are at risk.”

A spokesperson for the City of Edinburgh Council told Scottish Housing News: “The decision not to take forward a new contract has been made by Right There despite our attempts to find a resolution. We are disappointed they have taken this step but we were unable to reach an agreement with them over their financial demands.

“We will meet with them soon to support them over the last few months of the contract to minimise any impact their decision may cause. We will do everything we can to find alternative accommodation for service users affected by this and also their staff who may have concerns about their jobs.”