Chancellor announces first Local Housing Allowance rise since 2020

Housing

A national charity helping those who face homelessness says the Autumn Statement announcement that Local Housing Allowance rates will be uprated across Great Britain for the first time in three years is “the single biggest step the Chancellor could take to prevent and end homelessness for tens of thousands of households.”

The announcement means housing benefit rates will be reset to cover the cheapest 30% of properties.

Since the UK Government introduced a freeze on housing benefit in 2020, the affordability of properties has plummeted as rental costs have hit record levels.

Homelessness charity Crisis’ carried out research with Zoopla earlier this year which showed that in England just 4% of 1-3 bedroom properties were affordable on Local Housing Allowance. Across Great Britain, the figure is just 5%. This has meant tens of thousands of people have been unable to afford increasing rental costs, many being forced into homelessness.

Chancellor Jeremy Hunt told Parliament today: “Because rent can constitute more than half the living costs of private renters on the lowest incomes, I’ve listen closely to many colleagues as well as the Institute of Fiscal Studies, the Resolution Foundation, Citizens Advice UK and the Joseph Rowntree Foundation who said that unfreezing the local housing allowance was an urgent priority.

“I will then increase the local housing allowance rate to the 30th percentile of local market rents. This will give 1.6 million households an average of £800 of support next year.”

Matt Downie, Crisis Chief Executive, said: “Today’s announcement to increase housing benefit is, in the short-term, the single biggest step the Chancellor could take to prevent and end homelessness for tens of thousands of households.

“1.8 million private renters currently receive housing benefit in England alone, yet our research with Zoopla shows that just 5% of properties in Great Britain are affordable to them. We’re pleased the Chancellor has finally listened to calls from the homelessness sector and councils and taken action to prevent more hardship.

“The three-year freeze on housing benefit has had devastating and far-reaching consequences, with people on the lowest incomes being completely priced out of renting. At the same time, we now have over 100,000 households in England alone trapped in temporary accommodation, while the number of people sleeping rough is climbing fast. Many councils are on the verge of financial collapse trying to cope with the demand.

“While the Chancellor’s decision to tackle homelessness in the short-term is a positive step, there is no room for complacency. The next UK Government must sustain this investment, otherwise we will see homelessness rise again.”

The LHA rise will come into effect next April.

Thanet council deputy leader Helen Whitehead, who is portfolio holder for housing, said: “Over the past few years Thanet has been through a period of extraordinary change and inflation in our rental market, with many of our most vulnerable residents still only receiving support at an assumed rental level dated to 2018/19.

“Many properties are now at or over 100% of the rental levels from 2018, and in spite of that, and in spite of multiple contacts with central government requesting an uplift, Local Housing Allowance remained frozen, which created an ongoing and extraordinarily difficult situation for Thanet residents.

“A rise in Local Housing Allowance is welcomed, as it should help to make many more private properties available to those on lower incomes; but there are still many more issues to be addressed to support residents in the private sector, and ensure that private rentals not only provide equity, but also are supported to do so.”

Local Housing Allowance

The Local Housing Allowance sets the maximum amount a council will pay in housing benefit for a private rental but this has been fixed by government since 2020 and despite Universal Credit and other benefits going up in line with inflation in April this has not been the case for LHA.

Currently the LHA rates for Thanet are per month:

Shared accommodation £299.17

1 bedroom £473.72

2 bedrooms £648.22

3 bedrooms £797.81

4 bedrooms £947.40

These amounts do not reach the rates being asked for in the private rental sector. A search of rentals recently shows the cheapest rooms for rent at £90-£100, leaving a £100 per month shortfall.

For a one-bed home the cheapest flat listing was £595 per month, leaving a £120 shortfall’ the cheapest 2-bed home listing was for £575, coming under the LHA rate, but the majority of properties were £695 and above.

11 Comments

  1. That’ll help TDC in terms of the new homes it’s buying , should considerably reduce the time period at which the homes become revenue positve.
    However the problem with LHA is that effectively sets the floor for rental prices and will often lead to rent increases for private tenants who are not in receipt of benefits as well as those that are.
    Be interesting to see where the new figures come in at locally , around £625 for a 1 bed and £775 for a two will be my guess.

    • Well seeing as it was Gordon Brown that introduced LHA they’d have had to either uprate it or bring another system in, but the Tories are trying to buy a few votes just as Gordon Brown with Labour when he invented it. It’s a bad idea in the absence of plenty of housing and by itself drives rents up over time.

  2. Too little too late, completely empty electioneering gesture. They have merely give back a very small percentage from all the cuts made by the Tories in the last 14 years.
    Completely inadequate, just like the Tory government over the last decade.

  3. A classic example of the Tory party prioritising people on benefits over people that work hard for minimum wage. People on benefits are getting another ‘payrise’ to cover rent hikes but workers can’t get a pay rise because something about a wage price spiral. I have no idea why Tory politicians and voters have so much contempt for workers.

    • Yep, and then the gov wonders why so many people want to sign on the sick. The current wheeze is young couples both on pip “sharing a property” which means they both get the housing element , currently that equates to a total income of £31,200 ( £15,600 each). The last flat I advertised attracted several such enquiries.
      Social media is a marvel, doesn’t take long to find people and see what their lifestyles are like. Something wrong in a country where it takes so long to find a decent tenant that passes referencing. The flipside of the campaign to do away with Sec21 ( especially if there’s no reform of the courts and legal process for repossession on other grounds) is that landlords have to be very selective as to who they offer a tenancy to.
      It’s all very well increasing LHA but this just makes life hard for lower income working tenants, where as in the past many landlords were quite content to keep good longterm tenants on lower rents , relying on the eventual capital gains to be the real earner. Now that capital gains has been altered and likely will be again under labour, along with the absurdity of Sec24 which means that interest payments are now limited in the tax relief that can be claimed, landlords need to take the income when they can rather than be at the whim of tax policy, so many tenants who’d been on rents well below the local market rent are seeing large increases. Other landlords are choosing to sell up before the capital gains tax rules change again which is why there are so many tenants seeking accomodation.
      When LHA rates increase this is going to set the floor for rents and many more people will be getting rent increases. As surely anyone that works can afford the same rents as someone reliant on benefits?
      The whole system is a mess, the only things that will help sort it out are either a massive reduction in population increase, along side an even bigger increase in housebuilding ( to cope with those arriving and existing demand) though in reality it needs to be a balance of both. But where on earth the country finds the money to pay for the sevices and infrastructure that is also needed is beyond me.

  4. So they are getting another £66 a month from next April, that won’t touch the sides! I resent my tax money going to Buy to Let landlords, why am I paying for their mortgage? The only answer is build council houses!

    • So you have two homes both of which have the rent paid by LHA from your tax

      1st is a council property which in addition to the LHA is funded ( to a much smaller degree than in the distant past) additionaly by grant funding , the council staff are paid out of council tax as are their pensions, council doesn’t provide floor coverings , redecorate between tenancies or provide any white goods, pays no tax

      2nd a private landlord, provides their own deposit, pays income tax, unlikely to get any grant funding ( apart from the perversity of funding from energy provider eco schemes for the worst performing homes, which creates a moral hazard all by itself, why update your property if someone else will pay if you wait long enough and the tenant is poor enough) provides floor coverings and if they want decent tenants and short voids keeps the property in good order and decorated, these days may pay tax on a portion of their turnover rather than profit, when they sell they’ll pay capital gains tax, they provide their own pension payments mainly from the capital gains but also from the small pension provision they can make as investors. In the 22/23 tax year landlords paid 1.8 billion in capital gains ( admittedly this is a blip as landlords decide to leave the sector) , a bold chancellor would have ring fenced that tax money for social housing.

      Despite your misgivings which property makes best use of the taxpayers money? I don’t expect to change dogmatic opinion , just putting a bit of balance in the mix

      • The latter scheme you mention is the capitalists’ ideal: moving tax-payers’ money into private bank accounts.

        • So the tax payers cash that goes into council/ housing association staffs salaries and pensions, payments to contractors, land owners , developers, etc etc , is’nt a transfer eventually into private bank accounts?
          The government pays huge numbers of companies, organisations and individuals to provide services that money will usually end up in private bank accounts of be paid in tax eventually , do you object to that too?
          The anti private landlord sentiment, is nigh on pure envy, people assume landlords have money posted through their letterbox everyday for no effort. There seems to be no thought for the time and effort that goes into being a landlord, or the substantial taxes paid. I saw this a while back and found it quite apt,

          “Socialism is merely a rationalisation for envy”

  5. I have just looked on Zoopla and the cheapest 2 bed to rent is £750 a month and there is only one a that price. From there they rise in leaps and bounds all the way up to £1,600 a month which is ridiculous but true.
    It seems that the LHA rates are completely un realistic.
    It must be a nightmare for anyone on a low income to find a home.

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