As Labour’s autumn budget approaches on 30 October, questions are being raised about what support will be available for struggling families.
While general benefit rises are expected to be announced in line with inflation, the government has not yet confirmed what will happen to some welfare spending – leaving 1.6 million claimants waiting anxiously for confirmation.
One welfare expert has told Yahoo News they re most concerned about is whether chancellor Rachel Reeves will unfreeze the local housing allowance (LHA) spend, thereby providing extra security for low-income renters.
In April 2024, LHA was increased to reflect the cheapest 30% of local rents using rental figures from September 2023. Prior to that, LHA had been frozen for four years at September 2019 levels.
As things stand LHA will remain frozen at the current level from 2025, unless the government makes an active choice to unfreeze it.
As a result, campaigners are warning claimants will come under “increasing strain” and that as many 20,000 private renters – including 10,000 children – will be pulled into poverty in 2025/26 if the Government doesn’t commit to unfreezing the allowance.
Here’s what we know about the allowance, and what claimants need to know.
What is the local housing allowance?
LHA sets the maximum amount of housing support available to lower-income households living in the private rented sector.
The local housing allowance (also known as LHA) was introduced in 2008 under Gordon Brown’s government and is a support payment available to tenants renting private sector accommodation in England, Scotland and Wales.
The money is paid to anyone eligible through their local authority.
The LHA comprises a set of rates for a number of categories, which are:
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a) ‘Shared Accommodation’ (Exclusive use of one bedroom and sharing the use of one or more of a: kitchen, bathroom, toilet, room suitable for living in)
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b) 1 bedroom dwellings (Those with one bedroom and exclusive use of a kitchen, a bathroom, a toilet and a room suitable for living in)
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c) 2 bedroom dwellings
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d) 3 bedroom dwellings
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e) 4 bedroom dwellings
You can find out the rates in your area by clicking the image below.
How is it calculated?
While the money is paid through local authorities, it is the Department for Work and Pensions that calculates the rate of LHA.
LHA is set at the 30th percentile of local market rents, meaning that three out of 10 properties of a particular size should be affordable to someone who requires help with their rent.
The LHA rates are based on private market rents being paid by tenants in what the government calls a broad rental market area (BRMA). This is the area within which a person might reasonably be expected to live.
These rents are being paid by people with the same number of bedrooms as the property where they live, or the number of rooms they and their household needs.
Freezing the rates
The previous Conservative government froze the rates for LHA last year, meaning that the support available for private renters stagnated while private rents rose.
The Labour government has not yet confirmed whether it will unfreeze the rates for 2025/6.
Research conducted by Manchester Metropolitan University (MMU) and commissioned by anti-poverty charity the Joseph Rowntree Foundation shows that if the government doesn’t unfreeze LHA:
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Private renters will be on average £243 worse off in 2025/26
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A working age couple with children will be £340 worse off in 2025/26
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The average private renter will be £703 a year worse off by the end of this parliament in 2029
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50,000 more private renters would be in poverty, including 30,000 children, by the end of this parliament in 2029
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60,000 more people would be pulled into deep poverty, including 10,000 children, and a huge 80,000 people, including 30,000 children, would be pulled into very deep poverty by the end of this parliament
A warning from campaigners
It is because of this that campaigners and charities are calling for the government to ensure levels of support reflect households’ costs by linking the LHA to local rent rises.
The Joseph Rowntree Foundation has warned that freezing LHA leads to soaring numbers of people being made homeless and living in temporary accommodation.
It could also spell trouble for the government in other ways.
Firstly, councils shoulder the costs of supporting private renters dealing with rising costs, which can force the government to act when the gap between LHA rates and rents grows too large. In the meantime, renters are forced to pick up that shortfall.
Rachelle Earwaker, senior economist at the Joseph Rowntree Foundation said that a commitment to permanently tying LHA to the cheapest 30% of private rents would be “a crucial first step to alleviating the hardship many in the private rental sector are exposed to.”
“Around 80% of low-income private renting households on universal credit or who receive housing benefit reported going without essentials like food and heating in the six months to May 2024,” she added.
Additionally, freezing LHA also leaves renters without any security.
Not knowing whether the support they receive will reflect the rent they have to pay leaves renters to rely on discretionary housing payments or the household support fund, at a significant cost to local councils, or to go without other essentials to pay their rent.
“While rents are set to rise 13 per cent over the next three years, support for low-income private renters is not,” Alex Clegg, economist at the Resolution Foundation told Yahoo News. “As rents increase, this freeze in rates risks placing low-income private renters under increasing strain at a time when homelessness is already at record rates.”
