Local Housing Allowance uprating provides a major, if temporary, boost to low-income renters amid a housing cost crisis across Britain’s major cities

The Chancellor’s announcement in the recent Autumn Statement that the Local Housing Allowance (LHA) will be re-pegged to local rents in April 2024 will bring welcome relief to many of Britain’s poorest households, with those in cities set to see some of the largest financial gains, according to new Resolution Foundation research published today (Saturday).

A temporary thaw examines changes in Local Housing Allowance (LHA) over time and how this has impacted households.

In April 2024, the LHA will be reset to match the 30th percentile of local rents in September 2023 – an average rise of 16 per cent across Broad Rental Market Areas (BRMAs), equivalent to £25 per week – meaning that the cheapest 30 per cent of rents in an area should be affordable to people claiming Universal Credit (UC) or Housing Benefit.

This is a welcome change in policy, as LHA rates have been frozen since April 2020, leaving poorer private-renting households with increasingly large shortfalls in housing support as rents have risen rapidly. The proportion of privately renting households on UC who did not have their full rent covered by housing support rose from 53 per cent in April 2020, to 63 per cent in August 2023.

Households who are set to see the biggest gains from rising LHA rates are those in areas where rents have risen the fastest in recent years, such as in London and the South East. A household renting a 3-bedroom property in Central London – which includes boroughs such as Camden and Kensington and Chelsea – could receive up to £82 a week in extra support.

But those in Britain’s cities beyond the capital will also see a large income boost: families renting a 3-bedroom property in Bristol could be up to £69 per week better off, while the equivalent household in Glasgow could gain as much as £48 a week, and in Leeds £38 a week. Even in areas with comparatively slow growth in rental prices, such as Darlington or Grimsby, the uprating could deliver an additional £520 per year.

However, one consequence of uprating the LHA next year is that thousands of out-of-work households that look set to gain in the first instance will hit the benefit cap – which was not uprated at the Autumn Statement – and consequently will receive limited or no increase in support. This particularly affects privately-renting families with children. As a result, out-of-work two-child families in receipt of full UC will have their benefits capped in 83 per cent of local areas next year, compared to in just 11 per cent of local areas for single adults.

The Chancellor also announced that the LHA will be re-frozen from next year, meaning April’s rise will bring only temporary relief to poorer households struggling with rising housing and living costs. This continues the highly variable pattern of housing support low-income renters have become used to: LHA has been uprated just five times out of the past 12 years.

Shortfalls in national funding for housing support will place additional pressures on already cash-strapped local authorities, as they are expected to bridge the gap when families are not able meet their rental costs. Last year, councils spent 9 per cent more on temporary accommodation than the year before, even though the Housing Benefit subsidy councils receive when they house a family in temporary accommodation has been frozen since 2011.

The Foundation says that the welcome increase to LHA rates in April will make a material difference to many of Britain’s poorest households, who will experience the first rise in housing support for four years. But rising rents mean that the real value of that support will dwindle over time, and that LHA should ultimately be uprated annually to reflect changing rental prices.

Alex Clegg, Economist at the Resolution Foundation, said:

“Britain’s poorest private renter households will see their Local Housing Allowance rise significantly in April next year for the first time in four years.

“This is particularly welcome news for households who have experienced the greatest rent increases in recent years – typically renters in Britain’s cities – as they stand to benefit most from this increase. Families in 3-bedroom properties in London could see their weekly housing support rise by as much as £82, while those in Glasgow are expected to see an increase of £48 per week.”

“But significant gaps in housing support remain – with the benefit cap set to wipe out the gains for many out-of-work households with children and the freeze set to return in 2024.

“The Government should uprate LHA annually in order to protect low- and middle-income households from changes in local rents.”