Renters face affordability crisis despite LHA boost

Low-income renters in England will struggle to afford their homes even after the government’s recent benefit boost, a campaign group has warned.

Generation Rent said that the increase in Local Housing Allowance (LHA) announced by Jeremy Hunt in the Autumn Statement would be outpaced by rent inflation within 18 months.

That would leave many low-income households with a shortfall between their income and their rent.

LHA is for tenants receiving Universal Credit or Housing Benefit and is based on the 30th percentile of local rents, meaning that it covers the cheapest 30% of properties in an area.

Local Housing Allowance to cover private sector rents

The deputy chief executive of Generation Rent, Dan Wilson Craw, said: “Until we build enough social homes, millions of people on low incomes will rely on Local Housing Allowance to cover private sector rents.

“But the past failure of the government to take responsibility for record rent inflation has resulted in welfare support falling behind and putting tenants at risk of eviction and homelessness.

“Last month’s announcement of an increase in LHA is sorely needed but will be overtaken quickly by actual rents, and tenants facing painful decisions today will be in the same position in two years’ time.”

He added: “It is past time for the government to relink LHA with local rents permanently so support automatically adjusts to housing costs every year.”

LHA has been frozen since 2019

Generation Rent says that LHA has been frozen since 2019 but average rents have risen by 18.3% above the level of support.

And in the Autumn Statement, the Chancellor said that LHA would be increased to the 30th percentile of local rents from April 2024 – based on the average rents in the year to September 2023.

This would mean a 13.3% rise in LHA compared to the current levels.

Now the campaign group says it is forecasting that rents will continue to rise faster than LHA, reaching 8.5% higher than today and 14.2% higher than the reference rents by the end of 2025.

This would mean that the benefit boost would be almost wiped out by rent inflation, leaving affordability for low-income households almost as bad as it is currently.

Used a model to predict rent inflation

The group has used a model to predict rent inflation, based on wages, population and housing stock data, and the new rent index published by the Office for National Statistics (ONS).

According to its analysis, the average annual shortfall for a two-bedroom house across all rental areas in England would be £1,370 by the end of 2025.

For some renters, especially those seeking a new tenancy, the shortfall could be much higher.

Generation Rent is calling on the government to permanently relink LHA with actual rents, to ensure that households on low incomes can secure a tenancy and avoid the threat of eviction and homelessness.

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