In a statement today (13th of January) Will Quince, minister of welfare delivery has confirmed the lifting of Local Housing Allowance rates to be in line with the Consumer Price Index (CPI) inflation rate – around 1.5%.
It’s said that the end to the freeze will impact 900,000 claimants and will see the amount of housing benefit received by claimants rise by £10 per month.
The move comes after the government announced in November that it would be ending the freeze to the majority of working-age benefits and increasing these in line with CPI – including for those claimants on Universal Credit and other legacy benefits.
The LHA was introduced in 2008 and is used to calculate housing benefit for those in private rented accommodation.
Prior to 2016 the LHA was based on enabling a tenant to afford a rent their area below which 30% of homes available should be cheaper, and 70% more expensive.
However, the disparity between what claimants receive in housing benefit and the amount they have to pay towards has increased over the years.
As reported by 24housing, private renters on low incomes are facing gaps of up to £260 a month between housing benefit and cheapest rents, according to new CIH research.
The research revealed that more than 9% of LHA rates across Great Britain now fail to cover the cheapest rents, as they were originally designed to do.
Following the announcement, the Residential Landlords Association says that as the Allowance has been frozen since 2016, a rise of around 1.5% is leaving tenants considerably out of pocket.
John Stewart, Policy Manager for the RLA, said: “The benefit level needs to reflect the realities of the level of rents locally.
“Given rents have risen by an average of 5%, and in some areas more than that over the last 4 years, a rise of 1.5% in the benefit level is not going to be much help to a tenant struggling to afford the rent in those areas and many others.
“If it really wants to help tenants, the government should restore the direct link between rent levels and the LHA instead of a paltry flat rate increase.”
Will Quince said: “This government is levelling up opportunity across the UK, and this will be a welcome increase for around 900,000 people as we provide more money to help pay for housing.
“We are committed to tackling all forms of homelessness – ending the freeze on housing benefits is just one part of achieving this.
“We have announced an additional £263m to help councils provide better support to homeless people, and importantly, prevent people from becoming homeless in the first place.
“We will continue to work with the Ministry of Housing, Communities and Local Government, and others across government, to find ways to support the cost of living in the rented sector.”
Cllr Richard Watts, Chair of the LGA’s Resources Board, said: “Today’s announcement is a step in the right direction but more should be done to help meet the challenges renters and councils face.
“Since LHA rates were frozen in 2016 they have fallen, on average, to just the thirteenth percentile of market rents. This means that in many parts of the country there are no properties available to those entitled to full support with their housing costs.
“Without investing in LHA rates to cover the true costs of renting, the gap many people face between their incomes and the cost of rent risks continuing to push many into financial hardship, in-work poverty and homelessness, and further stretch councils’ housing, homelessness and local welfare services.
”Everyone deserves a decent, secure and affordable home. Councils want to work with the Government in order to deliver the security that tenants need and support households who need help to meet their housing costs.
“As part of its forthcoming Budget, the Government should to restore the LHA rate to at least the 30th per centile of market rents, something the LGA has long called for.”
Responding to the announcement Jon Sparkes, CEO at Crisis said: “In our society everyone should be able to rent a safe, affordable home where they can thrive.
“So it’s extremely disappointing to see the government’s decision to raise housing benefit in line with inflation, following years of cuts, is just a drop in the ocean to what we know families need.
“Right now across the country, people are battling to keep their head above water by going without food or missing a crucial bill payment just to be able to pay their rent.
“No one should be forced to live like this, especially when we know we have the means to fix it. Our research shows that by investing in housing benefit, so it covers the true cost of rents, the government could lift more than 35,000 children out of poverty.
“Ultimately, making sure that everyone has a safe and secure home benefits us all. This is a missed opportunity for the government to put their money where their mouth is and provide struggling families with a life line. It’s vital that the Government restores housing benefit to cover the cheapest third of rents.”
Centrepoint, the leading charity for homeless young people, has welcomed the government’s decision to unfreeze local housing allowance from April but cautioned that benefit rates for under-25s leaving care or hostel accommodation remain too low for many young people to find a place to live.
Commenting, Centrepoint CEO Seyi Obakin said: “Unfreezing local housing allowance is a welcome first step, but a 1.7% increase means there will still be a big gap between benefits and rents in most areas of the country.
“The government is right to focus on building more homes, but in the short-term we urgently need to make sure that young people moving on from care or hostels can claim enough in benefits to put a simple roof over their head.
“The long-term aim must be to restore local housing allowance to cover at least the cheapest third of local rents in an area, but in the meantime allowing under-25s moving on from care or hostels to claim the higher one-bedroom rate must be a priority in the March Budget.”