Local Housing Allowance freeze is fuelling homelessness, warns London Councils

  • By JackGraves

New analysis by London Councils shows a significant reduction in the number of homes affordable to Londoners receiving Local Housing Allowance (LHA) over the past four years [1], with no properties affordable to claimants in certain parts of the capital [2].   

People who are eligible for LHA receive it as part of their housing benefit or Universal Credit payment to cover their housing costs if they have a private landlord. London Councils has calculated that only between 0 and 15 per cent of private sector rents across the capital are covered by LHA rates. In areas such as Outer South West London, not a single property is affordable for single claimants looking for a room in a shared house.

London Councils’ research also found that almost half (45 per cent) of the almost 200,000 low-income London households claiming LHA for private sector properties do not receive enough housing benefit to cover their rent [3].

These Londoners face an average shortfall of £50.71 per week, with households trying to bridge the gap through cutting back on essential spending such as food or utilities; or taking out loans. The financial pressures are pushing many into rent arrears, putting them in danger of becoming homeless.

London Councils’ analysis highlights that 19 per cent of claimants across the capital live in properties with fewer bedrooms than they are entitled to – with this rising to a third of claimants in some areas – meaning that they are legally overcrowded. Boroughs believe this overcrowding is due to the lack of affordable accommodation at an appropriate size.

With a chronic shortage of social housing in the capital, many low-income Londoners depend on finding accommodation in London’s private rented sector. However, the government has introduced a series of changes to LHA since 2011, including a four-year freeze on LHA rates from April 2016, which has severely restricted the pool of properties affordable to London households who use the benefit to pay their rent.

London Councils is calling on the government to boost LHA so that claimants can afford at least the lowest 30 per cent of local market rents. Boroughs believe this would help prevent homelessness for thousands of Londoners, while reducing the wider costs to the public sector that homelessness creates.  

Cllr Muhammed Butt, London Councils’ Executive member for welfare, empowerment and inclusion, said:

“The counterproductive LHA freeze is fuelling London’s skyrocketing rates of homelessness.

“Keeping LHA frozen during a period of fast-rising rents has made private renting in the capital increasingly unaffordable. The resulting pressures on household finances are immense and a crucial factor in the increase in homelessness, with the number of homeless households in London 50 per cent higher at the end of 2017/18 compared to 2010/11.

“Bringing LHA back up so that claimants could afford at least 30 per cent of local housing in the private rented sector would significantly improve accommodation options for Londoners and would represent a big step forward in tackling homelessness in the capital.”

Greg Beales, campaign director at Shelter, said:

“When housing benefit is so low that people are having to find over £50 of week to cover even the lowest rents, they face grim decisions between food, electric bills and keeping a roof over their head.

“The problem isn’t just confined to London, there is a gap between LHA and the bottom third of rents in 97% of areas across the country. The benefits freeze is pricing people out of anywhere to call home, and directly stoking the homelessness crisis. We urge the government to lift the freeze and raise housing benefit so it can actually cover rent, or we will keep seeing people pushed into poverty and homelessness as a result.”

There is no evidence that the government’s changes to LHA rates have had the desired effect of reducing London rents. Rent levels have continued to rise across most parts of London. Since 2015, the 30th percentile rent level has risen in 68 of the capital’s 70 LHA rate areas. Combined with the freeze, this has resulted in a smaller pool of properties being affordable to households reliant on benefits to meet their housing costs.

There is a growing body of evidence linking LHA changes to increased homelessness. Temporary accommodation placements in London have seen a sustained increase since the LHA reforms were first introduced in April 2011. The ending of an assured shorthold tenancy (the most common type of tenancy with private landlords) is now the biggest cause of homelessness.

Around 54,000 homeless London households – including 87,000 children – currently live in temporary accommodation placements organised by the boroughs, accounting for almost 70 per cent of the total in England.

As well as increasing the number of Londoners requiring temporary accommodation, the LHA restrictions have also made it harder for boroughs to find affordable accommodation to place homeless households. Boroughs’ temporary accommodation costs have ballooned from around £460 million a year in 2013-14 to around £690 million a year in 2017-18 according to a report by the BBC [5] – while boroughs’ core funding from central government has been reduced by 63 per cent since 2010.




Notes to Editors:

  1. LHA sets the maximum amount of support a benefit claimant can receive through either housing benefit or Universal Credit to help pay their rent 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 sector. The LHA rate a household can receive depends on the number of bedrooms they are entitled to and which ‘Broad Rental Market Area’ they live in. Bedroom entitlements range from a single room in a shared house for single claimants under the age of 35 (known as the Shared Accommodation Rate) to a maximum of four bedrooms.
  1. London Councils’ analysis is based upon new rent data published by the Valuation Office Agency, which is used by the Department for Work and Pensions to calculate LHA rates.  
  1. London Councils surveyed its members between January and March 2019. Boroughs were asked how many Housing Benefit claimants with full entitlement received less LHA than their eligible rent, what the average gap between rent and LHA received was and how many households were resident in properties with less rooms than their entitlement. 22 boroughs responded.  
  1. In 2011 the government reduced the LHA from covering 50 per cent of local market rents to 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. The Secretary of State for Work and Pensions, Amber Rudd MP, has indicated that she expects the LHA freeze not to be renewed. A decision will be taken as part of the anticipated 2019 Spending Review.
  1. Source: BBC News – London temporary housing costs up by half in four years (2 August 2018): www.bbc.co.uk/news/uk-england-london-44885033