Exploring the links between frozen Local Housing Allowance and employment

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Executive Summary

The freeze in Local Housing Allowance (LHA) is making it harder for people to find and maintain work. Nearly 1m households, 58% of all privately renting households receiving the Universal Credit (UC) Housing Element, now receive support that fails to cover their rent. 

As private rents surge while support stays stuck at September 2023 levels, low-income renters are facing a financial squeeze that undermines their ability to enter, maintain, or further employment. 

Key findings: 

• Low-income private renters are facing widespread and growing hardship. The UC private renters we help with debt have average budget deficits of £69.97 a month, over 20 times deeper than the average for UC social renters. 

• Across Britain, 50% of LHA households are in employment and 50% are not. Among the people we help with the UC Housing Element, private renters are more likely to be in work (30%) than social tenants (18%), with the latter group more likely to not be working because of a long-term health condition or disability.

• Inadequate LHA is a barrier to work. 1 in 5 UC private renters in the UK said that struggling to afford essentials affected their ability to find work, or increase their hours. Some are cutting back on spending that enables employment: 53% of the UC private renters who’d cut back or stopped spending on childcare, reduced their hours or stopped working as a result.

• Frozen LHA puts the people we support “between a rock and a hard place”. Those we support face impossible choices between living somewhere more affordable or being closer to work and their support networks. 

• How frozen LHA affects low-income private renters varies considerably across the country. Areas where households are most likely to have shortfalls between LHA and their rent are often the same as those where LHA households are least likely to be working, especially in Wales, the North West, and the North East of England. Our frontline staff also tell us that place-based factors - local labour and rental markets, housing stock, and public transport -  are significantly shaping how frozen LHA causes hardship for the people they help.

Recommendation: To turn the tide on housing costs, the government should restore the link between LHA and real rents in the autumn budget, by uprating LHA to the 30th percentile of local rents. The link between LHA and the 30th percentile also has to be maintained permanently to prevent the unequal regional impact of freezing support.