Around 900,000 people across the UK could see their housing benefit payments increase by around £120 a year from April after the government yesterday announced that it is lifting the freeze on Local Housing Allowance (LHA) rates, which has been in place since 2016.
The decision means that payments, which are based on private market rents being paid by tenants in the broad rental market area (BRMA) - within which a person might reasonably be expected to live - will rise by inflation, which currently stands at around 1.5%, from the start of the new tax year.
A freeze on LHA rates was introduced in 2016 by then-chancellor George Osborne, replacing the existing regime which saw LHA rates broadly cover the cheapest third of rents within the government’s BRMA.
John Stewart, policy manager for the RLA, commented: “The benefit level needs to reflect the realities of the level of rents locally.
“Given rents have risen by an average of 5%, and in some areas more than that over the past four years, a rise of 1.5% in the benefit level is not going to be much help to a tenant struggling to afford the rent in those areas and many others.
“If it really wants to help tenants, the government should restore the direct link between rent levels and the LHA instead of a paltry flat rate increase.”
The change will affect around 1.4 million private renters who receive LHA, which is determined by the Valuation Office Agency.
But many analysts believe that an additional £120 a year, or £10 a month, is simply not enough to help those already unable to afford their rent.
David Cox, chief executive, ARLA Propertymark, said: “When LHA was first created it allowed low-income families the ability to afford half of all private rented sector accommodation. However, due to successive cuts and the freeze, this number has dropped to less than 10% in most parts of the country.
“While any increase is welcome, this uplift does not go far enough. Ultimately, the government has missed an opportunity here to really help vulnerable and lower-income tenants.”
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