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Rent Strike: How low-income tenants face hard choices over how to make up housing benefit shortfalls

4 min read

Tenants on low incomes in private housing face rent shortfalls of hundreds of pounds a year after the government froze housing benefit for a second year running, amounting to a real-terms benefit cut in most of England as living costs soar.

Analysis of government data shows tenants even in relatively cheap properties face heavy and rising rent shortfalls despite receiving housing benefit.

The data covers rents in England only, but the housing benefit freeze applies across the United Kingdom and the impact is likely to be similar in Scotland, Wales and Northern Ireland.

Local Housing Allowance (LHA) is the benefit paid to tenants in privately rented housing, including those on Universal Credit. Having been boosted at the start of the pandemic, LHA rates were frozen in cash terms in 2021/22, and are being frozen again in 2022/23 – meaning a real-terms benefit cut for tenants experiencing rising rents.

Tenants paying the 30th percentile of local market rents for rooms in shared housing in outer north-east London – including Romford, Loughton and much of Barking – would have had their rent fully covered by LHA in the first year of the pandemic. They now face a shortfall of £23 a week – almost £100 a month – between their housing benefit and their rent.

Tenants on average local rents in this area faced a rent shortfall even during the pandemic – it has now risen by £1,200 a year.

Large rent shortfalls have opened up right across England – in Birmingham, Greater Manchester, Barrow, Leeds, Essex and Wakefield, among others. Four-figure shortfalls affect the 30th percentile of four-bed property rentals in 26 areas plus central London, which has a £24,000 shortfall, mostly due to the benefit cap.

A spokesperson for renters’ union Acorn says: “With LHA rates frozen for the second year, despite nowhere near keeping up with inflation, and rents continuing to rise at the fastest rates in years, people receiving housing benefit are left with less money to pay for more expensive housing. This is having a serious impact on many people’s lives, especially at a time of a growing cost of living crisis with huge hikes to energy, food and fuel costs.

“We need serious and immediate action from the government to alleviate the suffering this freeze is causing.”

Until 2012, LHA payments were capped at the average local private sector rate – the 50th percentile of local rents. This meant tenants paying cheap or average private rates would have their rent covered in full. Tenants in more expensive housing received LHA up to the average rent level, leaving them to make up the remainder.

However, in 2012 the coalition government cut the benchmark from the 50th to the 30th percentile of local market rents, meaning tenants paying average local rents were left with a shortfall. Years of below-inflation rises in LHA levels, coupled with a benefit freeze, then slashed the real-terms value of the LHA well below the 30th percentile.

In January 2020 the Scottish government said LHA covered only the cheapest five per cent of properties in some areas.

In response to Covid, the government restored the link to the 30th  percentile in 2020/21, but has since kept LHA frozen in cash terms – meaning it is now based on rent data collected in the year to September 2019, despite rent rises in most areas.

On average, tenants in England paying the 30th percentile of market rents now face an annual shortfall of £187 for a room in shared accommodation, £313 for a one-bed property, £372 for a two-bed, £498 for three bedrooms and £690 for a home with four bedrooms. (These averages mask wide local variations, however.)

A Department for Work and Pensions spokesperson said: “During the pandemic we increased LHA significantly and beyond inflation, benefiting over one million households by an average of over £600 over the year. We’re maintaining that boost, keeping support for private renters above pre-pandemic levels.”

Critics point out, however, that the increase has been maintained in cash terms, not real terms.

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