Housing Benefit Freeze to Leave Low-Income Private Renters Out in the Cold

Housing Benefit Freeze to Leave Low-Income Private Renters Out in the Cold

The Government’s announcement comes as rents across the UK rise at their fastest rate since the financial crisis in 2008

Rents are rising at their fastest since the financial crisis. Energy bills have shot up and Universal Credit has been cut. Next spring, energy bills are set to rise again together with National Insurance. Now the Government has quietly confirmed that it will add to the worsening cost of living crisis next April by cutting housing benefit for private tenants on low incomes in England, Scotland and Wales – even as Conservative MPs claim their own rent on expenses while profiting from landlordism.

Work and Pensions Secretary Therese Coffey said in a statement to Parliament last week that the Government would increase most benefits and pensions by 3.1%, in line with inflation – but this won’t apply to Local Housing Allowance (LHA), the housing benefit that is paid to tenants in the private rental sector. 

“The Local Housing Allowance rates for 2022/23 will be maintained at the elevated cash rates agreed for 2020/21,” Coffey said in her statement.

However, talk of “elevated cash rates” is spin for what is, in reality, a benefit cut for the second year running. 

When the Conservatives took office in 2010, LHA was capped at the average private sector rent in a local area – also known as the 50th percentile of local market rents. This meant that a private tenant on a low income had their entire rent paid by LHA if their rent was anywhere up to the average rent charged by local private landlords (for that size of property). If a tenant’s rent was above the local average, LHA would only cover their rent up to the local average – leaving a shortfall that the tenant would have to pay themselves.

The Coalition Government soon cut this LHA cap from the 50th percentile to the 30th percentile of local market rents, meaning that tenants on average local rents would be left with a shortfall by LHA.

And worse was to follow. The Government first raised LHA by less than the rate of inflation and then froze it in ‘cash terms’ from 2016 to 2020. Thus, even as rents rose, the LHA cap stayed the same. The 30th percentile of local rents might rise from £100 a week to £140 a week in that time – but LHA would still be capped at £100 a week, falling well below the 30th percentile in the process. This meant that far more private sector tenants were left with a shortfall on their rent, as homelessness rose across England.

At the start of the Coronavirus pandemic, the Government raised LHA back to the 30th percentile – this is the “elevated cash rates agreed for 2020/21” that Coffey’s statement referred to. But the Government then refroze LHA in 2021/22 – and has now done so again for 2022/23.

Housing benefit is being cut, with LHA again falling ever further adrift of the 30th percentile of local private sector rents – let alone average local rents.

The announcement comes as rents across the UK rise at their fastest rate since the financial crisis in 2008. Figures from property website Zoopla showed that rents in the UK increased by nearly 5% in the year to September 2021 – and by 6% outside of London. This, combined with the LHA freeze, means that more tenants on low incomes will be left with shortfalls on their rent, and those who already face rent shortfalls will find those shortfalls getting bigger.

Anela Anwar, chief executive of anti-poverty campaign group Z2K, told Byline Times: “The decision to refreeze Local Housing Allowance rates will leave around a million low-income tenants, who already don’t receive enough to cover their rent, hundreds of pounds worse off. By quietly imposing this real-terms cut in housing benefit this Government is yet again abandoning those tenants.  

“The disconnect between the real cost of renting and benefits rates combined with the recent cut to Universal Credit all adds up to a lot more private renters at risk of losing their home next year. And it will leave many more facing excruciating choices between paying their rent or feeding their families and heating their homes.”

The combination of rising rents and the LHA freeze in 2021/22 meant that tenants in some areas lost more than £1,000 a year. Only 11 of the 193 ‘broad rental market areas’ – the areas across which local rents are calculated – saw no tenants facing rising rent shortfalls due to the LHA freeze. 

A spokesperson for tenants’ union Acorn told Byline Times that the Government’s decision to freeze LHA rates is “yet another example of them actively abandoning tenants and people in poverty”.

It is not clear why Local Housing Allowance has been frozen while other benefits are raised in line with inflation. Byline Times put this question to the Department for Work and Pensions, but it did not address it. 

In a statement, it said: “During the pandemic, we increased Local Housing Allowance significantly and beyond inflation, benefitting over one million households by an average of over £600 over the year. We’re maintaining that boost for another year, keeping support for private renters well above pre-pandemic levels.”