A freeze on housing benefit could force thousands of tenants into homelessness, particularly single young people, the Chartered Institute of Housing (CIH) warns.
New research produced by the professional housing body shows that more than 90% of Local Housing Allowance (LHA) – which is a benefit for private renters – now fails to cover the cheapest rents. This means it is failing to fulfil what it was originally designed to do.
Housing allowance rates were frozen for four years in 2016 and have now fallen so far behind private rental rates that in some areas the shortfall is more than £3,000 a year.
CIH chief executive Terrie Alafat CBE says: “Our research makes it clear just how far housing benefit for private renters has failed to keep pace with even the cheapest private rents. We fear this policy is putting thousands of private renters on low incomes at risk of poverty and homelessness.
“We are calling on the government to conduct an immediate review and to look at ending the freeze on Local Housing Allowance.”
LHA rates are designed to cover the cheapest 30% of homes in any given area. However, they have not been increased in line with local rents since April 2013 and remain frozen until April 2020.
As a result, renters face gaps ranging from £25 a month on a single room in a shared home outside of London to more than £260 a month on one to four-bedroom homes in some areas of the capital.
Over a year the gap ranges from £300 and £3,120, which the CIH warns could force renters to choose between paying for basic necessities like food and heating or their rent.
The government introduced targeted affordability funding in 2014 to bridge the biggest gaps, but the CIH’s new report has found that its impact has been negligible, covering only a handful of the shortfalls completely.
Time to reform housing benefits
Matt Downie, director of policy and external affairs at Crisis, adds: “Homelessness is not inevitable – there is clear evidence that it can be ended with the right policies in place. The government must urgently reform housing benefits for private renters, so they not only match the true cost of renting but also keep pace with future rent changes.”
The CIH says the policy is hitting single people aged under 25 particularly hard, because they are only entitled to LHA to cover the rent on a bedroom in a shared home. The level of other benefits they are entitled to is also much lower.
David Smith, policy director for the Residential Landlords Association, says the report serves as a reminder of the difficulties facing young people in the private rental sector.
“With many unable to afford a home of their own, and waiting lists for social housing remaining long, we need to do more to support those who desperately need a thriving private rental market to provide the homes they need and to sustain existing tenancies.
“This means lifting the Housing Allowance freeze so that it better matches the realities of today’s private rental prices,” Mr Smith says.
This policy would not necessarily lead to substantial increases in government spending, in his opinion.
“Official data shows that in the year to July 2018, private sector rents across Britain increased by just 0.9%, far less than inflation,” he adds.
A government spokesperson says: "We spend £24 billion a year on housing benefit each year. And since April we've provided additional, targeted housing support for low-income households by increasing more than 200 local housing allowance rates.
"Since 2011, we have provided a further £1 billion in Discretionary Housing Payment for local authorities to support vulnerable claimants with their housing costs.”
The spokesperson adds that the government has also delivered over 378,000 new affordable properties since 2010 and is investing a further £9 billion in affordable homes to buy and rent.