Looking beyond the Local Housing Allowance policy announcement

Will Atkinson argues the UK Government must end the freeze on Local Housing Allowance in the forthcoming budget.

For two years, tenants in social housing lived under the threat of having their housing benefit cut through being capped at the Local Housing Allowance (LHA) rate. This Sword of Damocles was also suspended over the wider supported housing sector, putting the future viability of vital older people’s sheltered housing, homeless hostels and women’s refuges at risk.

The Prime Minister’s announcement to scrap the proposed implementation of the LHA cap on social and supported housing, due to come into force in April 2019, could not have come sooner. Since the Autumn Statement in 2015, the building of new supported accommodation has been forced to a near standstill due to the uncertainty over ongoing funding once they have been built. and undue stress has been placed on social housing tenants.

The Welsh population is ageing. Our recent Housing Horizons Data Resource found that there will be an additional quarter of a million people aged over 65 in Wales in 2036. Sheltered housing and extra care make up over three quarters of the supported accommodation in Wales. Homelessness is also rising, despite the prevention work undertaken by Welsh Government, and the number of incidents of domestic abuse continues to increase year on year.

Housing benefit makes up the core of funding for hostels and vital women’s refuges. Not only has the uncertainty over funding prevented the building of new beds, it put those already in existence at risk. Although additional funding was promised to plug the gap between LHA and rents, the detail on this was lacking and laid open to future cuts. This was not a risk we could take at a time of rising rough sleeping of vulnerable men and women.

There was no such additional funding promised for social housing general needs properties. For those families living in housing association or council properties across Wales, this would have meant using other incomes to top-up their housing benefit in order to meet their rent. For tenants already accessing foodbanks in order to eat every day, this could have spelled disaster.

The devil of LHA truly lay in its detail. Developed in 2008, LHA was designed to cap housing benefit entitlement to the 50th percentile of private rented sector rents (PRS). This, in theory, made 50% of the PRS affordable to those claiming housing benefit. So far, so good. However, years of welfare reform have derailed the cap from its original aim. In 2011, the percentile was lowered to the 30th. In 2016, housing benefit was frozen altogether for four years. After only one year of this freeze, we are now in a situation where, in many areas, housing benefit claimants can only afford 10% of the PRS. In some areas, this is 2% and can only get worse.

A further sting lies in the tail of LHA. For single people aged under 35, only the Shared Accommodation Rate (SAR) of LHA is available, regardless of whether someone is living in a one bed flat or a shared house. It is a further cruel twist that the SAR is also the hardest hit of LHA rates by the freeze. In Neath Port Talbot, the SAR can only cover rent in one of the sixty-six shared rooms sampled to create the LHA rate. If the freeze on LHA was lifted, of these properties would be affordable.

LHA is a policy designed for the private rented sector. It is completely unsuitable for restricting housing benefit in social housing due to the fundamental differences in how the two housing sectors work. Rents in the private sector respond to a number of factors: most notably interest rates on landlords’ mortgages, landlord costs, and supply and demand. These factors can lead rents to vary wildly, both falling and rising, year on year. It is these rents which are used to set the LHA rates. The setting of social rents is simple. Housing associations and councils do not make a profit. Rents are set at the lowest rate possible, while delivering safe, quality homes.

The scrapping of the LHA cap has provided huge relief for social housing, but there has been no such relief for tenants in the private rented sector. Under current UK Government plans, the freeze on LHA will continue until April 2020.

Our recent analysis of LHA rates in Wales shows that, by 2020, it is very likely that there will be areas of Wales where housing benefit will not cover the rent in any PRS homes. Increasing numbers of tenants will be forced to rely on other income streams to cover their rent, not forgetting that, for many, this income will be made up of other working age benefits, such as job seeker’s allowance, which have also been frozen from 2016 to 2020. Inevitably, people will turn in higher numbers to high interest lenders, leading to default and potential homelessness.

We are seeing a growing homelessness crisis across the UK and, although homelessness can be complex, it is increasingly evident that the bulk of the growth in people without a stable home is due to welfare reform. If the UK Government is serious about tackling homelessness, it must start by ending the freeze on LHA, and other working age benefits, in the UK budget on 22nd November.


All articles published on Click on Wales are subject to IWA’s disclaimer.

Will Atkinson is Policy Officer at Community Housing Cymru

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