LHA freeze leaves one million renters facing growing rent shortfall

More than one million low-income renters face crisis as the gap between rents and benefit support is set to hit a record high, claims a think tank.

The Resolution Foundation is calling on the government to unfreeze Local Housing Allowance (LHA) rates at the Autumn Budget, warning that the growing gap between rents and housing support is putting increasing pressure on low-income renters.

The think tank is calling on the government to unfreeze Local Housing Allowance (LHA) rates at the Autumn Budget.

LHA shortfall will grow over time

According to the think tank’s Saving Private Renters report, fewer than 2% of homes listed for rent in Great Britain could be covered by LHA alone.

The data reveals that low-income families renting a two-bedroom home in inner East London face a typical monthly shortfall of £324, while the shortfall is at least £200 across the rest of London.

The Resolution Foundation says this shortfall will only grow over time because LHA rates were last linked to actual rents in April 2024 and have been frozen ever since. As rents rise, the gap between support and rental costs widens, with the shortfall set to reach a record 23.3% in October this year.

The data also challenges concerns that increasing LHA rates could lead to higher rents, with just 10p of every pound of additional LHA support showing up as higher rents at the bottom of the market.

This mirrors previous research which found that 90% of the 2011 LHA cut fell on tenants, with only around one-tenth reflected in lower rents.

The April 2024 LHA uplift also reduced the number of Universal Credit households in England facing a rent shortfall by more than 150,000, directly benefiting the families it was intended to support.

Relieve the pressure on low-income families in the PRS

The Resolution Foundation says the policy to unfreeze LHA rates would cost £2 billion a year by 2029-30, but benefit more than one million low-income renters.

Stephen Hunsaker, economist at the Resolution Foundation, said the government must unfreeze LHA rates in the Autumn Budget next month.

He said: “The gap between average rents and Local Housing Allowance levels is set to reach a record high this October, and failing to repeg LHA to actual rents in next month’s Budget could lock in a freeze for another year, and see the gap reach 30% by March 2028.

“Rather than primarily benefitting landlords, our new analysis shows that the last time LHA was repegged to local rents in April 2024 it was tenants that benefited, with the fraction of LHA recipients facing a shortfall between their rents and the amount they could claim dropping significantly.

“With many tenants receiving housing support already going without essentials to pay their rent today, the government should restore the automatic annual linking of LHA to relieve the pressure on low-income families in the private rented sector.”

As previously reported by Property118, the government has defended freezing LHA rates, claiming a range of factors were considered before the freeze, including “the challenging fiscal context”.