The problems caused by the Local Housing Allowance freeze

Brief background

The Local Housing Allowance (LHA) freeze has caused severe problems for nearly 2 million private rented sector tenants. LHA is not a separate benefit, the rate affects how much help a tenant will get when renting from a private landlord. It is used to work out both:

Housing benefit
The Universal Credit housing element

According to the housing charity, Shelter:

“1.8 million private renters in England – one in three of all renters – receive help through universal credit or legacy housing benefit to afford their home. The local housing allowance (LHA) sets the maximum amount they can claim, and is meant to ensure that people can access the cheapest 30% of local homes. But LHA has been frozen since 2020, based on rents in 2018-19, while private rents have risen rapidly to their highest recorded levels.”

The Government has frozen LHA rates since April 2020, despite rising rents and living costs. Since then, rents for new lets have increased by more than a fifth on average. This means that the proportion of new private rental properties affordable to people on Universal Credit or housing benefits has dropped from 23% to just 5%. As a result, low-income households on benefits increasingly cannot afford private sector rents.

The latest research

The Institute of Fiscal Studies (IFS) outlined that this is the ‘lowest level on record’. Though there is some regional variation the problem affects all areas of the UK. Their other findings provide cause for even more concern, for example:

The quality of properties has dropped.
Heating and hot water costs have also risen.
Increased energy costs are making rented properties less affordable.

In the report, the IFS highlights that:

“Low income households in private rented properties were in any case much more likely than social renters or owner occupiers to be living in homes that are much more hazardous, in disrepair, difficult to adequately heat or lack modern facilities. Around a quarter of private rented homes lived in by low income people would not meet the Decent Homes Standard.”

The percentage failing to meet the ‘Decent Homes Standard’ is spread as follows:

Private rented sector – 25%
Owner-occupiers – 18%
Social rented – 12%

Since 2008, even more low-income families have moved into the private rented sector (PRS). This has happened as fewer people have accessed home ownership.

Only 1 in 20 newly let PRS properties is covered by housing benefits. In addition, the freeze on LHA housing benefits arising from Government policy is now causing millions of renters to fall into poverty.

The IFS comments on the current situation:

“Private renters on low incomes are seeing the number of properties they can afford shrink dramatically as housing benefit fails to keep pace with soaring rents. Clearly, the government’s freeze on local housing allowance (LHA) is unsustainable.

Even if renters can find somewhere affordable to live, it’s likely to be a home that’s unsafe or in disrepair. These homes are also harder to heat, leaving renters facing energy bills they just can’t afford.

As more people on low incomes rent privately, it’s crucial that the government unfreezes LHA and ensures it reflects market rents so that families aren’t forced to choose between homes that are unsafe or homes they can afford.”

Scotland’s letter to the UK Government

The Scottish Government recently wrote to the UK Government asking it to ‘reconsider the ongoing freeze to the rates of LHA’. The letter also highlighted that:

The LHA had been frozen again for the third year running.
There has been a high increase on some Scottish rents (the rent cap does not apply to new lets).
Three years of rent freeze are making rents unaffordable.
The growing gap between rents and the LHA level is creating a greater risk of homelessness.
The freeze is also leading to greater poverty and inequality.

The Scottish Minister’s letter reaffirms the IFS observation:

“Compared to uprating them to match local rents, the freeze in LHA rates will reduce support for nearly 1 million households by an average of £50 per month.”

The letter also explores the cumulative impact of the cost of living crisis and the LHA freeze, emphasising how it adds to the high pressure on low-income households.

Overall, there are concerning findings that the UK Government’s decision to freeze the level of housing benefits and Universal Credit housing element has hit millions of the poorest renters in the UK the hardest. It is a largely ‘silent’ or ‘low profile cut’ to public spending that has severely impacted millions and local government will be directly .

Nigel Long is an associate writer of the LGIU and runs Action Disability Training and Consulting. Find out more about Nigel and his advocacy work in this feature interview here.