0:01 AM, 6th February 2024, About 11 months ago 10
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While the Government has confirmed new rates for Local Housing Allowance (LHA), the amounts are lagging behind rent rises, a report from Savills reveals.
The new rates, which are the maximum amount that people renting from private landlords can receive in Housing Benefit or Universal Credit, will apply from April to March 2025.
They will increase by an average of 17%, or £110 more per month, compared to the current rates.
This is the first increase in LHA rates since April 2020, when they were unfrozen after four years.
However, private rents have risen by an average of 29% in the UK since then, according to Zoopla, as the demand for rental properties exceeds the supply.
This means that many housing benefit claimants will still struggle to find somewhere to rent – and it’s worse in more expensive areas of the country.
A spokesperson for Savills said: “These increases will be welcomed by working households living in the private rented sector and reliant on housing benefit, even if they don’t match up to the full rental increases experienced over the last four years.
“But for those households not in work and subject to a benefit cap, the LHA increases will make little difference, particularly in less affordable housing markets such as London.”
They added: “Private rents will remain out of reach for most and particularly for homeless households that local authorities are trying to move out of temporary accommodation.
“A policy emphasis on supply that provides much needed affordable homes is therefore required to alleviate pressure on an already highly competitive private rental market.”
Savills found that only 2.3% of new rental listings in London were affordable for housing benefit claimants in 2022-23, down from 18.9% in 2020-21.
The study also found that across England, housing benefit claimants who were not affected by the benefit cap could only afford the cheapest 3% of rental homes in 2022-23, well below the original aim of LHA to cover the cheapest 30% of homes.
The new LHA rates vary by property size and location with the biggest increase is for shared accommodation, which will go up by 21%, followed by four-bedroom properties, which will go up by 18%.
One to three-bedroom properties will all go up by 16% – these increases are still lower than the average rise in rents reported by Zoopla.
In money terms, the largest annual LHA increases will be seen in parts of London and the South but, when compared to existing rents, London’s LHA rates have increased less than the national average, by only 14%.
The highest proportional increase will be in Bristol, where LHA rates will go up by 34%, or £293 more per month.
This is roughly in line with the rise in private rents in the city since April 2020, which was 33%, according to Zoopla.
Manchester will see the second highest proportional increase of 32%, or £221 more per month, but this is below the 36% rise in rents in the same period.
Glasgow will also see a significant increase of 32%, or £223 more per month, but this is far below the 46% rise in rents.
In Scotland, Savills says, the introduction of rent control policies has reduced the supply of rental properties, leading to higher rents.
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Reluctant Landlord
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Sign Up9:53 AM, 6th February 2024, About 11 months ago
interesting - supposing Labour get in and caps rents at 3%.
If you have benefit tenants the LHA is increased, but the rent you charge is at that point below the current LHA - does that mean you can still only increase the rent by 3%?
If that is the case then the tenant will be forever be liable for paying personal top ups going forward to meet the rent as it can never be increased enough to match the LHA rate which would actually pay the rent in full and ergo the inevitability of them running up arrears.....
GlanACC
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Sign Up10:52 AM, 6th February 2024, About 11 months ago
All I can say is more fool anyone for taking on LHA tenants. Surely with the number of people looking to rent a valid excuse could be found for rejecting them.
Reluctant Landlord
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Sign Up16:32 PM, 6th February 2024, About 11 months ago
Reply to the comment left by GlanACC at 06/02/2024 - 10:52not so easy when you have properties in 'certain areas' your tenant 'pool' is limited....
OR where those who DO work still receive and reliant on some/all of the rent element of UC.
I have recently lowered the monthly rent to a private payer (over offering a tenancy to a benefit recipient) purely on the basis that they funded their own deposit and RIA etc therefore presenting a more financially/less risky and better option.
Jonathan Clarke
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Sign Up9:39 AM, 7th February 2024, About 11 months ago
Reply to the comment left by GlanACC at 06/02/2024 - 10:52
You need to understand a market I suggest before you reject it . With the new LHA rates I can get £1500 pcm LHA in a property which would be lucky to attract £1100 pcm with a private tenant. (The previous 2020 rate was still very viable @ £1300 pcm ) The rent is paid direct into my account each month by the government . So that's a £4,800 pa gain over and above a private tenant and it is in effect guaranteed by the government . If you had 10 of them that's an extra 48K pa . So surely that is not foolish but smart.? I would respond by saying `more fool anyone` who simply ignores / rejects the LHA market without first examining the potential financial benefits it offers in certain areas / circumstances
GlanACC
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Sign Up13:35 PM, 7th February 2024, About 11 months ago
Reply to the comment left by Jonathan Clarke at 07/02/2024 - 09:39
I understand your reasoning, I just think (like may HMOs) it ruins the neighbourhood and pees of may of the neighbours.. suppose it depends on where it is though
Old Mrs Landlord
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Sign Up14:08 PM, 7th February 2024, About 11 months ago
Reply to the comment left by Jonathan Clarke at 07/02/2024 - 09:39
You are fortunate indeed to be letting properties in an area where LHA rates match or even exceed market rents. Not so good for us whose properties are in a part of the country where LHA rates start at £200pcm below market rents for one-bedroom flats and £400 or so for two-bedroom houses.
Jonathan Clarke
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Sign Up14:13 PM, 7th February 2024, About 11 months ago
Reply to the comment left by GlanACC at 07/02/2024 - 13:35There is a good business case for LHA . The rate goes with the person not the property . So a 2 bed flat in a poor area bought for 120K gets the same LHA rate as a a 2 bed house in a more affluent area for which you might pay 200K for . So the yield is far better. By nature also the LHA tenant dynamic in the poorer area is that the neighbours are often in council housing. They are happy there as its where they grew up in . I agree if you put in tenants from a very different background they may clash with the existing prevalent cultures within and you may get problems . So naturally I try to avoid that as i want a peaceful life. 3 rules . Pay your rent don't trash the place and don't upset the neighbours.
Jonathan Clarke
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Sign Up14:23 PM, 7th February 2024, About 11 months ago
Reply to the comment left by Old Mrs Landlord at 07/02/2024 - 14:08
Absolutely . I eased off when the LHA rates froze and also when UC came in . The yields dropped so the margins were not as great And it doesn't work with all bed sizes in my area . But with the new rates for 3 and 4 beds it makes it quite attractive again. And if you can buy a 3 or 4 bed in the poorer areas as you know you get exactly the same LHA rate and so that maybe 20K or so less deposit you have to put in at the start means you can buy more property . I worked on a principal in the past of buy 4 and get the 5th one for free in effect !
Old Mrs Landlord
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Sign Up15:12 PM, 7th February 2024, About 11 months ago
Reply to the comment left by Jonathan Clarke at 07/02/2024 - 14:23
You are obviously an astute businessman.
Reluctant Landlord
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Sign Up17:04 PM, 7th February 2024, About 11 months ago
Reply to the comment left by Jonathan Clarke at 07/02/2024 - 09:39I agree. It's a case of weighing up tenant type and location. I too have big properties in not so great areas that private payers tend to avoid - but when the higher LHA kicks in, the rent will only be £100pcm off the common market rate.
£100 rent a month for a larger family even on benefits is totally affordable. They probably pay more already for temp accommodation!
Currently being redecorated - once ready I expect to be inundated with applications.
Last three bed I had in same area had 95 enquiries in 5 days and achieved £50pcm over what was marketed. Chosen tenant moved in a week later.