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The impact of freezing LHA rates in London

Proposals to freeze the amount that private renters can receive in housing benefit could drastically affect the affordability of renting in much of London

  • By London Councils

Summary

Local Housing Allowance (LHA) rates determine the maximum housing benefit that can be paid to private renters. 

In response to proposals in the Summer Budget to freeze these rates for four years, London Councils has analysed what this could mean for the affordability to housing benefit recipients of renting privately in different parts of London.

Download our full report "The impact of freezing LHA rates in London"

Findings

Central London and high-value parts of inner London are currently very unaffordable - characterised by fewer than 5-10 per cent of rental properties in those areas being affordable to housing benefit recipients. London Councils’ analysis of the proposed LHA freeze suggests this could become the norm across the majority of London by the end of the current Parliament.

The report also shows that while the Government’s proposed ‘Targeted Affordability Fund’ (TAF) could prevent some parts of London from becoming unaffordable, it is still the case that large parts – if not the majority – of London would be at levels, or just above levels, that could be considered “very unaffordable”.

Recommendations

Given the potential for the four-year freeze in LHA rates to significantly affect the affordability of the private rented sector across London, London Councils recommends:

  • The government engage with London Councils over the effects of the freeze, giving consideration to making a targeted exemption for London. This could involve a decision on the setting of LHA rates in the capital being taken on an annual basis, informed by regular assessments of affordability. Crucially, this should be determined outside of the constraints of the TAF.

If it must proceed with a freeze on LHA rates in London, London Councils recommends:

  • The government commits to a fresh programme of evaluation to assess the effects of the policy over the whole course of the parliament and beyond
  • The government engages with London Councils as soon as possible over the design of the Targeted Affordability Fund, placing a priority on the affordability of private rents in the capital. This should include reviewing the basis on which the savings from the freeze are calculated to ensure a fair and appropriate TAF.

Download our full report "The impact of freezing LHA rates in London"