• Press release

Only 5% of London private rentals affordable to low-income households, research finds

New research reveals just 5% of private rental listings in London are affordable to low-income households using Local Housing Allowance (LHA) to pay their rent [1].

The study also provides robust evidence that London’s private rented sector (PRS) has shrunk in size, with Londoners finding it increasingly difficult to secure PRS housing. 

The analysis found that up until April 2021 London’s PRS continued to grow. However, from April 2021 to December 2023, 45,000 rental properties were sold in the capital without being replaced. This accounts for 4.3% of London’s privately rented homes, with the lower-cost (i.e. more affordable) end of the market particularly affected. 

Such findings reinforce concerns that reduced availability of privately rented properties in the capital puts low-income Londoners at increased risk of homelessness and that further action is needed to improve housing affordability.

The analysis was undertaken by Savills and commissioned by London Councils and Trust for London. It represents a more detailed look at the sector following research published by London Councils last year that found a 41% reduction in the number of PRS properties advertised to let since the Covid-19 pandemic (comparing January-March 2023 to the January-March average across 2017-19). New lettings were down due to a combination of tenants staying longer in properties and an apparent reduction in the overall number of homes available to rent, which this new research now confirms.

Key points from the analysis include:

  • The availability of listings affordable to households relying on LHA to cover their rent gradually reduced throughout 2023-24 for all property sizes. Despite the government raising LHA in April 2024 to cover the lowest 30% of local market rents, the research shows that by July-September 2024 only 5% of London listings were affordable on LHA. This is because the LHA uplift in April used rental data from September 2023 and in the context of rapidly rising rents these rates quickly fell out of step with market conditions. 
     
  • Landlords selling rental stock to owner occupiers has increased sharply. From April 2021 to December 2023 45,000 rental properties were sold without replacement. This accounts for 4.3% of London’s privately rented homes. Homes sold by landlords to owner occupiers are worth £410,000 each on average across the capital.
     
  • Properties are leaving the rental market at a much faster rate in the most affordable locations to rent. During 2023, PRS stock across the lower end of the market reduced by 3.3% per month as a proportion of available listings compared to 2.6% per month across the rest of London. The loss of properties at the lower end of the market has a particular impact on the ability of low-income households to access the PRS and makes it harder for boroughs to prevent and relieve homelessness, including through using PRS properties as temporary accommodation.

London is home to an estimated 2.7 million private renters (around 30% of the capital’s population). Over 400,000 private renters in London – approximately one in seven – rely on LHA to cover their housing costs, meaning that access to affordable privately rented accommodation is a key issue for low-income Londoners.

London is grappling with the most severe housing and homelessness pressures in the country. London Councils estimates that one in 50 Londoners is currently homeless and living in temporary accommodation arranged by their local borough, and has warned that skyrocketing costs “threaten to break borough budgets”. London Councils’ figures show the number of London households owed homelessness support jumped by 15% in the past year (April 2023 to April 2024). 

In the run up to the Budget on 30 October, London Councils is calling for the increase in LHA rates to become a permanent measure, with LHA rates updated annually to track market rents and help ensure adequate support for low-income tenants in the PRS. 

The cross-party group is also pushing for more funding for local authorities to purchase housing being sold by private landlords, as this will improve the availability of accommodation for boroughs to offer homeless households. In addition, boroughs are seeking a doubling of the Homelessness Prevention Grant (London boroughs received £157m from the government through this grant in 2024/25).

Cllr Grace Williams, London Councils’ Executive Member for Housing & Regeneration, said: 

“These stark figures are the latest evidence of the massive pressures faced by low-income private renters in the capital.

“London’s homelessness emergency is fundamentally driven by the chronic shortage of affordable housing. There are 2.7 million people relying on privately rented housing in the capital. The falling number of privately rented homes and worsening shortage of affordable accommodation are an urgent challenge for Londoners and London boroughs.

“Further action at a national policy level can help us turn the situation around and we are committed to working closely with the government on this important agenda. Interventions such as increasing Local Housing Allowance rates to keep pace with rent rises would help prevent homelessness and save public money in the long run.”

Chris Buckle, Director, Savills Research, said: 

The affordability of renting in London has become very stretched and our research shows that loss of homes previously available to rent is adding to the pressure, particularly for those with low incomes.

“Policy solutions that boost the supply of private rented housing, going beyond new housing supply, are urgently needed to help ease the supply-demand imbalance.”

Susie Dye, Trust for London’s Grants Manager, said: 

“It’s no surprise to renters that it’s desperately hard to find a home in London if you don’t have the money for a deposit and are on a low income. 

“Savills has now given us the best available evidence of this, and it points clearly to the way forward. The government is rightly working to protect renters through the Renters’ Rights Bill. But it urgently needs to act to make homes more affordable through ensuring Local Housing Allowance covers the actual costs of renting for those who need it, funding for local authorities to support those made homeless in the broken housing market, and ultimately with significant investment in building social housing.”

Read the full report here.

ENDS

[1] Local Housing Allowance (LHA) goes to eligible households as part of their housing benefit or Universal Credit payment to cover housing costs if they have a private landlord.

LHA was introduced in 2008 as a way of setting the rent element of housing benefit for tenants living in the private rented sector. In 2011 the government reduced LHA from covering 50% of local market rents to the bottom 30% (the 30th percentile). Following this, the link between LHA rates and actual rent increases was broken when they were uprated by the Consumer Price Index (CPI) in 2013, prior to a 1% cap on uprating in 2014 and 2015, before a four-year freeze from April 2016.

In response to the Covid-19 pandemic, the government lifted LHA rates in April 2020 to cover the 30th percentile of local market rents. They were then frozen again until April 2024. 

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