WIREDGOV

Millions of people living and working in the private rented sector face chronic uncertainty due to a failure by the main political parties to provide clarity on housing benefit rates.

Over 1.5 million households renting privately in Britain receive Universal Credit with support for their housing costs, known as the Local Housing Allowance (LHA), included. However, an analysis of government data by the National Residential Landlords Association (NRLA) suggests that, of this group, two-thirds (65 per cent, nearly one million households) experience a shortfall between their LHA payment and their monthly rent.

In April 2024 the LHA rate was once again pegged to the lowest 30 per cent of rents in any given area. This followed a freeze introduced in April 2020 which had caused benefit rates to be detached from market rents. According to the Institute for Fiscal Studies, this led to just five per cent of private rental properties being affordable for those in receipt of LHA.

Since then, the Institute for Public Policy Research has warned that even with the LHA rate unfrozen, over 800,000 households on Universal Credit will continue to face shortfalls between their housing support payment and the rent they pay. The picture is set to worsen given that LHA rates are due to be frozen from April 2025.  

None of the main parties’ manifestos have pledged to permanently link housing benefit rates to the bottom 30 per cent of rents for the duration of the next Parliament. Failing to do so means they have ignored recommendations made by the cross-party Work and Pensions Select Committee, and leaves those living and working in the private rented sector struggling to plan for the future. 

Ben Beadle, Chief Executive of the National Residential Landlords Association, said:

“It is time to fix the broken housing benefit system once and for all. The lack of clarity about support in the future is causing insecurity and anxiety for renters and landlords alike. It undermines efforts to sustain tenancies and prevent homelessness in the first place.

“The lack of any pledges to address this issue by the main parties is unacceptable. The next government must confirm that housing benefit rates will permanently track market rents. This would provide the assurances needed that support would keep pace with the cost of housing.”

Notes:

• According to Stat Xplore, as of February 2024, there were 1,520,079 households in the private rented sector in receipt of Universal Credit with the housing cost element to it.  Of this group 992,972 (65%) had a gap between the Local Housing Allowance they were paid and their monthly rents.
• An analysis by the Institute for Fiscal Studies in June last year found that since April 2020, the proportion of new private rental properties listed on Zoopla affordable for those in receipt of the LHA had fallen from 23% to just 5%.
• A recent report by the Institute for Public Policy Research, has noted: “We estimate that even when LHA is unfrozen, over 800,000 households on UC will continue to face shortfalls – while 30 per cent of private rented sector homes in an area may be affordable under LHA rates, those properties may not be available.

“We expect that the situation will deteriorate as local housing allowance rates are frozen again from April 2024, leading the rates to become divorced from reality once again.”

• In a report published in March, the Work and Pensions Select Committee noted that: “The evidence is clear that support for housing costs cannot be viewed in isolation from wider support provided through other benefits. When and if claimants experience a shortfall in rent, this can impact other parts of household budgeting and erode income otherwise intended for daily living costs. The Government should make  a commitment to uprate annually Local Housing Allowance so that it retains its value  at the 30th percentile of rents in a Broad Rental Market Area (BRMA).” 

Further information about the NRLA can be found at www.nrla.org.uk. It posts on X @NRLAssociation.

The NRLA’s press office can be contacted by emailing press@nrla.org.uk or by calling 0300 131 6363.