‘Damaging’ housing benefits are leaving low-income renters with nowhere to rent in England

Renters on low incomes who receive benefits are being left with nowhere to turn because local housing allowance rates (LHA) do not cover rising private rents anywhere in England.

Local housing allowance rates – which set the maximum amount tenants receive through universal credit or legacy housing benefits to afford their homes – have been frozen since 2020.

LHA is supposed to cover the lowest 30% of market rents but new analysis from Chartered Institute of Housing (CIH) and Shelter now shows that is not the case anywhere in England for a typical two-bedroom rented home.

Instead, fewer than one in five private rents in England were viable within LHA rates, with renters facing an average shortfall of £151 a month.

Charlie Berry, policy officer at Shelter, said: “These huge shortfalls leave private renters at high risk of going into rent arrears and push families towards homelessness. With fewer and fewer affordable private rentals for people on housing benefit and a severe shortage of social housing, we are sadly left with a homelessness crisis; there are now more than 101,000 homeless households living in temporary accommodation, the highest number for almost 20 years.

“The evidence is clear: the government must end the damaging freeze to local housing allowance which is leaving low-income families with nowhere they can afford to call home.”

With rents rising alongside the wider cost of living crisis in the three years LHA was frozen, the 1.8 million private renters in England who receive benefits have faced a steeper challenge to find a place to live.

While LHA does not keep up with rents across England, some areas have a larger shortage of property than others.

The issue is a particular problem in the South East of England where fewer than 10% of properties are affordable on LHA rates in the Eastbourne or East Sussex areas. In Yeovil, in the South West, just 7% of properties would be covered by housing benefit. In Tameside, Greater Manchester, just 5% of properties are suitable for low-income renters.

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Meanwhile, cities such as Bristol and Leeds see only one in 10 properties available.

It’s not just a problem facing urban areas. In parts of North Yorkshire, around Scarborough, 13% of properties are covered under the current LHA rate. For parts of rural Suffolk, around Bury St Edmunds, just 8% of properties fit the bill.

It’s more bleak for single people under the age of 35 claiming the cost of a room in a flatshare. Around 5% or less of rooms to rent were affordable in 24 out of 152 local areas in England. In coastal areas such as North Cornwall, North Devon, Plymouth and Dover – where debate about the impact of second homes and holiday lets rages on – there were no affordable rooms at the shared accommodation rate at all.

Sam Lister, CIH’s policy and practice officer, said: “Rent inflation has lagged behind CPI inflation and higher inflation has led to deterioration [in the number of properties affordable for people on housing benefits].

“If it continues at the kind of high rates that rent inflation is running at now in pretty much all areas then that decline in what’s available will shrink even faster. We’ve seen by no means the worst of it at the moment.”

Shelter and CIH analysed data collected by the Valuation Office Agency to show the actual rents tenants paid between October 2021 and September 2022.

The data, across 152 broad rental market areas, is used by the DWP rents to calculate LHA rates. However, rents have continued to rise in recent months which means the picture is even worse for low-income tenants in 2023.

Housing campaigners, charities and organisations have been calling on the government to raise local housing allowance rates in recent times, arguing that the benefit leaves renters at risk of racking up rent arrears and falling into homelessness.

Last year, Crisis and Zoopla reported 90% of all rented homes in England were unaffordable for people receiving housing benefits. Crisis chief executive Matt Downie said at the time that “enough is enough” and that the government can no longer ignore rising rents in the cost of living crisis.”

But since then, there has been no rise planned for LHA.

The Big Issue’s Big Futures campaign is also calling for the government to increase LHA to prevent homelessness.

Big Issue founder and crossbench peer Lord John Bird said: “It is a false economy not to help provide the necessary support so people can live in their homes. It is a false economy also because it penalises landlords who are supportive of their tenants.” 

A Government spokesperson said: “We recognise the pressures of rising rents which is why we have maintained 2020’s £1 billion boost to Local Housing Allowance rates which provided more than a million claimants with an extra £600 a year on average.

“We are projected to spend over £30 billion on housing support in 2023-24 on top of a significant package of support to help with rising costs, worth an average of £3,300 per household.

“For those who face a shortfall in meeting their housing costs, discretionary housing payments are available from local authorities.”

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The Big Issue’s #BigFutures campaign is calling for investment in decent and affordable housing, ending the low wage economy, and millions of green jobs. The last 10 years of austerity and cuts to public services have failed to deliver better living standards for people in this country. Sign the open letter and demand a better future.