Housing benefit rates increase but still lag behind private rent rises

While the Government has confirmed new rates for Local Housing Allowance (LHA), the amounts are lagging behind rent rises, a report from Savills reveals.

The new rates, which are the maximum amount that people renting from private landlords can receive in Housing Benefit or Universal Credit, will apply from April to March 2025.

They will increase by an average of 17%, or £110 more per month, compared to the current rates.

This is the first increase in LHA rates since April 2020, when they were unfrozen after four years.

However, private rents have risen by an average of 29% in the UK since then, according to Zoopla, as the demand for rental properties exceeds the supply.

This means that many housing benefit claimants will still struggle to find somewhere to rent – and it’s worse in more expensive areas of the country.

Welcomed by households reliant on housing benefit

A spokesperson for Savills said: “These increases will be welcomed by working households living in the private rented sector and reliant on housing benefit, even if they don’t match up to the full rental increases experienced over the last four years.

“But for those households not in work and subject to a benefit cap, the LHA increases will make little difference, particularly in less affordable housing markets such as London.”

They added: “Private rents will remain out of reach for most and particularly for homeless households that local authorities are trying to move out of temporary accommodation.

“A policy emphasis on supply that provides much needed affordable homes is therefore required to alleviate pressure on an already highly competitive private rental market.”

2.3% of new rental listings in London were affordable

Savills found that only 2.3% of new rental listings in London were affordable for housing benefit claimants in 2022-23, down from 18.9% in 2020-21.

The study also found that across England, housing benefit claimants who were not affected by the benefit cap could only afford the cheapest 3% of rental homes in 2022-23, well below the original aim of LHA to cover the cheapest 30% of homes.

The new LHA rates vary by property size and location with the biggest increase is for shared accommodation, which will go up by 21%, followed by four-bedroom properties, which will go up by 18%.

One to three-bedroom properties will all go up by 16% – these increases are still lower than the average rise in rents reported by Zoopla.

The largest annual LHA increases

In money terms, the largest annual LHA increases will be seen in parts of London and the South but, when compared to existing rents, London’s LHA rates have increased less than the national average, by only 14%.

The highest proportional increase will be in Bristol, where LHA rates will go up by 34%, or £293 more per month.

This is roughly in line with the rise in private rents in the city since April 2020, which was 33%, according to Zoopla.

Manchester will see the second highest proportional increase of 32%, or £221 more per month, but this is below the 36% rise in rents in the same period.

Glasgow will also see a significant increase of 32%, or £223 more per month, but this is far below the 46% rise in rents.

In Scotland, Savills says, the introduction of rent control policies has reduced the supply of rental properties, leading to higher rents.