Local Housing Allowance Freeze: Rising Rents and Decreased Affordability Deepen the Housing Crisis

In the 2023 Autumn Statement, the government announced an end to a four-year freeze in local housing allowance rates (LHA) rates.

However, on the 30^th October 2024 Rachel Reeves quietly froze them again, this has raised serious concerns for low-income renters across the UK.

Despite increasing rental prices, the LHA—originally designed to help people cover the lowest affordable housing costs—has not kept pace with actual rent levels for nearly a decade. Since 2013, the Conservative government has frozen LHA rates for seven of the last twelve years, preventing automatic adjustments to reflect rising rents and contributing to a deepening housing affordability crisis.

Understanding Local Housing Allowance

LHA is calculated by the Department for Work and Pensions (DWP), using data from the Valuation Office Agency (VOA). Each year, the VOA determines rates for properties based on:

– Bedroom Number:The LHA rate is calculated based on the number of bedrooms a household qualifies for.

– Rent Levels:The LHA is intended to reflect the rent levels in the local area, although these levels have consistently outpaced the rate.

– Broad Rental Market Area (BRMA):Rates are based on rental prices within designated BRMAs, which are broad areas containing a variety of property types and local services.

The 30th percentile rent for properties of different sizes within each local “Broad Rental Market Area” (BRMA) based on rents surveyed in the year to September 2023, up to national maximum amounts.

LHA was last set at the 30th percentile of local rents in April 2020. The previous freeze meant rates were not increased with inflation or rising rents. This future freeze will mean the same

In theory, LHA should be equal to the lowest affordable housing rents. But as rent levels rise, the gap between LHA rates and actual market rents has grown. This has left households unable to find affordable housing, forcing many into rental arrears or insecure living situations.

A Decline in Affordable Housing

Recent analysis by the homelessness charity Crisis and property website Zoopla paints a bleak picture of rental affordability. Just 4% of 1–3-bedroom properties listed over the past year were affordable to renters reliant on housing benefit of Universal credit. This is a steep drop from 12% in April 2022, illustrating how far the LHA has fallen behind real rental costs. Today, over one in three renters in the UK rely on housing support, but options for affordable housing are disappearing fast.

The situation is not limited to high-cost urban areas like London, where a 75% drop in affordable housing has been reported. Even in regions that were once more affordable, like the North West, a 68% reduction in affordable rental options for LHA claimants has been noted. Across the country, 32 local authority areas—including Barnsley, Wigan, and Mansfield—now have fewer than 1% of properties affordable for people receiving housing benefits. In these communities, the housing crisis is particularly stark, leaving tenants with few viable options for securing stable housing.

Rising Rents Exacerbate the Crisis

The affordability crisis is compounded by rising rents. Average UK rental prices have increased by 11% in the last year alone, far outpacing the LHA rate. This has led to a 55% drop in the number of private rentals accessible to those reliant on housing benefit or universal credit, creating a near-impossible situation for millions who depend on these payments to meet their basic housing needs.

Meanwhile, with landlords facing their own economic pressures, some experts suggest the freeze will incentivise property owners to raise rents more frequently and tighten tenant selection criteria. Combined with proposed changes under the Renters’ Rights Bill, which raises the arrears threshold and increases notice periods, this creates a challenging landscape for vulnerable tenants. Without LHA rate increases to meet rising costs, the financial strain on low-income renters is likely to grow, pushing more people toward homelessness.

The Wider Implications of the LHA Freeze

The government’s decision to freeze LHA has far-reaching implications. Critics argue that the freeze exacerbates income inequality and fuels the housing affordability crisis, edging the UK closer to a “Dystopian Housing Future,” where wealth determines access to stable housing. Labour has pledged to build 1.5 million homes to address the shortage, but with rents rising faster than wages, this measure will take years to have a noticeable impact on today’s urgent need.

Low-income households across the UK, already stretched thin by the cost-of-living crisis, are being priced out of their communities. For those in high-demand areas, the effects are even more pronounced as the available housing options shrink each year. Homelessness, once a crisis contained in metropolitan hubs, is now an issue affecting regional and rural areas, illustrating the far-reaching impact of a misaligned housing benefit system.

A Call for Reform

Housing advocates, charities, and opposition politicians are urging the government to reassess its stance on LHA.

Without these changes, the UK risks deepening the divide between those who can afford housing and those left behind. The shortfall in affordable homes has become more than an issue of public policy—it is a pressing social crisis that affects health, well-being, and the fabric of local communities.

As housing needs intensify, a return to indexed, realistic LHA rates may be a necessary first step toward a more equitable housing market. Until then, the LHA freeze serves as a reminder of the mounting challenges faced by low-income households and the urgency of finding sustainable, long-term solutions to the UK’s housing crisis.

Share This Article