Freeze on Local Housing Allowance risks private rent debt crisis
Next month’s Budget should reset Local Housing Allowance (LHA) to take account of rising private rents. Continuing the freeze risks causing a private rental debt crisis.
CAEE Research & Campaigns Team (3 minutes)
In November the government announced that benefits would rise in April by the rate of inflation. But LHA rates, linked to housing benefit and universal credit, remain frozen until 2024 at levels set after the pandemic.
The effect is an unsustainable rise in rent arrears. More households already paying up to half their income in housing costs can no longer afford to pay for essential products and services.
Local Citizens Advice Across Surrey agree the level of LHA is a large and growing problem.
Research and campaigns teams meeting last week confirmed an increase in LHA-related problems. Shortage of affordable property to rent is a chronic issue in Surrey. But on top of fast rising private rents, less available property and other cost issues, the LHA freeze is making things worse.
At CAEE in the year to date (Apr 2022 to Feb 2023) we helped more clients with housing than anything except benefits and tax credits. In 2022 private renters asked us for support with many more problems than those in other housing tenures (chart).
Without a change in policy the likely consequence is a big rise in homelessness.
Local councils in Surrey, including Epsom & Ewell, are reporting record social housing waiting lists. And the their responsibility to arrange emergency housing has led to a worrying increase in homeless people placed in temporary accommodation outside the borough.
Mind the gap
In a study of changes to the LHA the Institute of Fiscal Studies last month underlined the predicament of low-income renters. They note the geographical impact of freezing the level. The gap between the level of support and the rise in local rents is critical, particularly where, as in Surrey, rents approach London levels. They comment:
“….since rental prices do not grow evenly across the country, this gap was much larger for families who lived in areas where rents had grown quickly than for those who lived in areas where they had grown slowly.”
An institute spreadsheet shows that of seven Outer London ‘Broad Rental Market Areas’ the largest gap in 2022 was in ‘Outer SW London’. This is the Market Area that includes Epsom & Ewell as well as the SW London boroughs.
Unfreeze LHA now
Long-term, the solution can only be a new housing policy aimed at nothing less than providing secure, affordable, sustainable quality homes for all citizens. Meanwhile the government must now:
- allow housing support to respond to the rental market by unfreezing the LHA, and
- introduce its Renters Reform Bill to ensure a fairer private rented sector as promised in this parliamentary session (by May 2023).
The latest national Citizens Advice dashboard report, Another year, another renters’ crisis, explains the urgency. As does a November paper, Why the freeze on Local Housing Allowance is unsustainable.