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REVEALED: The Staggering Rises in Rent Shortfalls Caused by Housing Benefit Cuts

With the cost of living crisis pushing up rents and Local Housing Allowance frozen since 2020, more and more of the poorest private tenants are struggling to make ends meet

Photo: Guy Corbishley/Alamy

REVEALED: The Staggering Rises in Rent Shortfalls Caused by Housing Benefit Cuts

With the cost of living crisis pushing up rents and Local Housing Allowance frozen since 2020, more and more of the poorest private tenants are struggling to make ends meet

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Housing benefit cuts are squeezing private tenants according to Byline Times’ analysis of Government data – with some of the most severely-impacted cities experiencing a staggering 75% rise in the number of people receiving the benefit who are facing rent shortfalls over the past two years.

Local Housing Allowance (LHA) is the benefit paid to low-income tenants in the private rental sector, including those on Universal Credit. It is designed to cover only relatively cheap rents in each area, so people paying average rents or occupying more expensive housing are left with a shortfall they have to make up themselves, while those in cheaper housing have their entire rent covered by LHA.

But LHA rates have been frozen since April 2020, even as rents have risen sharply – meaning more and more tenants have been left with shortfalls on their rent. 

If LHA was limited to paying a maximum of £100 a week in rent in a particular area in April 2020, that limit is still £100 a week now – even if a landlord who charged £100 a week then has since raised the rent to £120 a week. The tenant would now have a £20 a week shortfall to make up themselves – at a time when other living costs are soaring and both pay and benefits are failing to keep pace.

Figures published by the Department for Work and Pensions (DWP) show that the percentage of LHA claimants left with a shortfall on their rent has risen from 53% in April 2020 to 58% in May 2022, the most recent figures available. 

And the situation is set to get worse. While LHA rates are confirmed each year, official forecasts produced by the DWP assume that LHA will remain frozen until at least the 2025/26 financial year – which would mean five years of cuts to the actual ‘spending power’ of LHA.

Matt Downie, chief executive of the charity Crisis, said that since housing benefit was frozen in 2020, there has been “mounting pressure on the ability of people receiving Universal Credit to pay their rent” and “this isn’t just a small section of society”.

On the Frontline of theBattle forBenefits

Chaminda Jayanetti

“One in three private renters are reliant on housing benefit to cover the cost of their rent, he told Byline Times. “This data highlights the shocking scale of the issue at hand. Every day that passes with housing benefit being stuck at its outdated rate means that more and more people are being pushed closer to the brink, staring down at homelessness.  

“The Government can’t delay any longer. Housing benefit, and in turn Local Housing Allowance, needs to be uprated immediately. Otherwise, thousands more people will be facing homeless in the coming months.”

There were 822,408 LHA claimants facing rent shortfalls in May across England, Scotland and Wales – nearly 200,000 more than in April 2020. But some areas are particularly affected.

The percentage of LHA claimants facing a shortfall on their rent in Nottingham and Thanet grew by 12% between April 2020 and May 2022 – more than twice the national average. It grew by 10% in Birmingham, Coventry and Central Greater Manchester, and by 9% in Outer North East London, Medway and Swale, Brighton and Hove, and the Isle of Wight.

The number of LHA tenants facing rent shortfalls in Birmingham rose by 75% in two years, from 10,980 in April 2020 to 19,234 in May 2022. 

Paul Barnes, head organiser at the Birmingham branch of tenants’ union ACORN, told Byline Times: “At ACORN Birmingham, members and our communities are struggling with the real terms cut in LHA rates. During a historic cost of living crisis, the real terms cut in LHA rates is pushing more renters into the red. This is partially due to LHA not matching the continuous rise in Birmingham rents which rose almost 4% over the past year and are predicted to rise up to 12% over the next five years. 

“Clearly, with rents rising we need to increase LHA rates and benefits generally to ensure renters aren’t falling further into poverty. However we demand further action. With a rise in LHA rates, there is a potential for an subsequent increase in rental prices and so we are campaigning for a rent freeze and pursuing policy to create the power for rent controls.

“In the long-term, we need to end the public purse subsidising over-priced private rentals through housing benefit. Instead, we need action to bring down rents to a sustainable, affordable level and greater provision of social housing.”

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LHA has been hit by successive cuts under the Conservatives.

When David Cameron became Prime Minister in 2010, LHA was capped at the average private sector rent in a local area – also known as the fiftieth 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 fiftieth percentile to the thirtieth percentile of local market rents. This meant that tenants on average local rents would be left with a shortfall by LHA.

Not satisfied with that, the Government first raised LHA by less than the rate of inflation and then froze it in ‘cash terms’ from 2016 to 2020, in practice falling well below the thirtieth percentile. Just before the pandemic, 68% of LHA claimants faced a shortfall on their rent.

At the start of the Coronavirus crisis, the Government raised LHA back to the thirtieth percentile, meaning that far more tenants had their rent fully covered. But since then, the Conservatives have re-imposed the freeze, with LHA again falling ever further adrift of the thirtieth percentile of local private sector rents – let alone average local rents. This is often spun in Government statements as ‘maintaining’ the increase.

A spokesperson for the DWP told Byline Times: “During the pandemic, we increased Local Housing Allowance significantly and beyond inflation, benefiting over one million households by an average of over £600 over the year. We’re maintaining that boost, keeping support for private renters above pre-pandemic levels.

“We recognise people are facing pressures with the cost of living which is why we have taken action through our £37 billion support package to help households with rising costs, including £1,200 this year for the most vulnerable.”

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