Falling Behind: The government is failing private renters by freezing Local Housing Allowance

Falling Behind: The government is failing private renters by freezing Local Housing Allowance 407 KB -PDF. Click here to access an editable Google doc version.

The full briefing by Sarah Hadfield, on the need to update Local Housing Allowance (LHA) in the Autumn Budget, is available using the link above. A summary is available below.

Executive Summary

Local Housing Allowance (LHA) is intended to ensure the cheapest 30% of properties in an area are affordable to people on low incomes. To do this, LHA was designed to increase as rents increase, by being regularly set at the 30th percentile of local rents. However, it has endured a period of successive caps and freezes, and after being restored to the 30th percentile in 2024, has been frozen ever since. 

This latest freeze has been against a backdrop of significant private rent increases, which have been consistently outpacing earnings for almost 2 years. As rents have continued to increase, the gap between costs and support for private renters has grown: fewer properties are affordable at LHA rates, and more low-income renters have shortfalls between the support they receive and the rents they have to pay. 

Our frontline data showed the difference the 2024 uprating made. After LHA was uprated in 2024, we saw a dip in the number of private renters seeking our help with housing cost support issues, although rising rents have seen that dip eroded away. For private renters we support with debt advice, who receive Universal Credit, we saw average deficit budgets improve by £25 a month directly after uprating. 

But our frontline data also shows the extent of hardship private renters are facing now, and the urgent need to uprate LHA again. In the 2 years since current LHA rates were set, rents have increased 14%, chipping away at the gains of 2024’s uprating. After LHA rates were set in September 2019 (before uprating in 2020), seeing rent increases of the same scale took over 3.5 years. Rents have also grown at different rates across the country, leaving some families with far larger gaps in support depending on where they live. 

For the people we help, the result of a widening gap between rents and LHA is deeper hardship, and for some, being pushed into crisis. So far this year, we have already helped over 12,900 private renters with homelessness issues - 10% more than the same period in 2023. 1 in 4 of the people we helped with low rates of LHA this year also needed referrals to charitable support and food banks.  

As we approach the Autumn Budget, the Government needs to ensure that those on the lowest incomes, who are currently unable to afford their rent, are not left behind. The way to do this is simply by letting LHA work as it was designed to, and uprating it to the 30th percentile of local rents.