An all-party House of Commons committee is calling on Local Housing Allowance to be updated automatically and annually.

LHA rates have been frozen since April 2020. The Institute for Fiscal Studies has noted that since then, the proportion of new private rental properties listed on Zoopla affordable for those in receipt of the LHA has fallen from 23 per cent to just 5 per cent.

From April this year the LHA rate will once again cover the bottom 30 per cent of rents in any given area. However, the Institute for Public Policy Research has warned that even when the rate is unfrozen, over 800,000 households on universal credit will continue to face shortfalls between their housing support payment and the rents they pay.

At present, housing benefit rates are set to be frozen again from next year.

One of 19 recommendations made by the Work and Pensions Committee’s new report, out this morning, says: “The evidence is clear that support for housing costs cannot be viewed in isolation from wider support provided through other benefits. When and if claimants experience a shortfall in rent, this can impact other parts of household budgeting and erode income otherwise intended for daily living costs. The Government should make a commitment to uprate annually Local Housing Allowance so that it retains its value at the 30th percentile of rents in a Broad Rental Market Area (BRMA).”

A more general recommendation made elsewhere in the report, and applying to all benefits and not just LHA, says: “There remains uncertainty for some benefits each year as to whether they will be uprated. We agree with the assessment of the Secretary of State that it is important that “there is an element of fairness to the consistency” of how uprating decisions are made. From financial year 2025–26, the Government should make an ‘Uprating Guarantee’ to uprate benefits annually with a consistent measure, for example prices … If the Government decides to deviate from the ‘Uprating Guarantee’, it should clearly set out its reasoning to Parliament. The Government should also undertake work to understand what impact the decision to not follow consistent practice would have on its benchmark of objectives for benefit levels.”

Sir Stephen Timms, the Labour MP who is the committee chair, says: “It is right that our benefit system incentivises work, but it should also provide an effective safety net for jobseekers, people on low incomes, carers and those with disabilities.  We have heard plenty of evidence that benefits are currently at a level that leaves many unable to afford daily essentials or meet the unavoidable extra costs associated with having a health impairment or disability.

“The Government has previously said that it is not possible to come up with an objective way of deciding what benefits should be.  Our recommendations are a response to that challenge, and the ball is now back in the Government’s court.

“On top of acknowledging and acting on a new benchmark and objectives linked to living costs, Ministers should commit to consistent uprating of benefits each year.  It is time to end the annual ‘will they or won’t they’ speculation and all the worry that brings to those who rely on the social security system for financial support.”

Responding to the proposals by MPs on the Work and Pensions Select Committee, the chief executive of the National Residential Landlords Association – Ben Beadle – says: “We welcome the Committee’s call for housing benefit rates to be reviewed annually in line with housing costs. This has been a longstanding call by the NRLA and others. Too often the housing benefit system has left tenants and responsible landlords not knowing if rents can be covered from one year to the next. What should be a safety net has become a source of frustration and anxiety.

“All parties need to provide certainty for those reliant on benefits that they can keep a roof over their heads by ensuring rates permanently remain linked to market rents.”

Activists in Generation Rent also back the move. Chief executive Ben Twomey says: “This recommendation is very welcome and guaranteed support for renters in need is long overdue. Certainty for people receiving Local Housing Allowance means that the situation of the last few years, where these benefits remained frozen while rents soared, would not be able to be repeated.

“Generation Rent have been campaigning on this issue for a long time and are glad to see that reflected in the committee’s report. We urge the government to adopt these findings at the earliest possible opportunity to reduce homelessness and mend the broken safety net for those in need.

“However the reliance on LHA is a concern and leads to the government effectively subsidising sky-high rents and putting money straight into landlords’ pockets. This change must come with a commitment to address the cause of this issue. The government must slam the brakes on soaring rents to give renters the breathing space we need during the cost of living crisis.”