Growing affordability concerns in the private rented sector

Recent research reports by the Chartered Institute of Housing and the Fabian Society have pointed to growing affordability concerns in the private rented sector, caused by changes and cuts to Housing Benefit. Affordability is also a growing concern for Housing Rights’ clients, particularly those in the private rented sector.

Impact of Housing Benefit cuts in the private rented sector

The research by the Chartered Institute of Housing (CIH) demonstrates the cumulative effect of recent changes and cuts to Housing Benefit in the private rented sector. 80% of Local Housing Allowance (LHA) rates across Northern Ireland now no longer actually pay for the cheapest 30% of the local market, with tenants having to pay up to £9.46 per week. By 2020, CIH claim that the freeze of Housing Benefit will result in LHA rates bearing little real relationship with actual private sector rents.

The Fabian Society’s report demonstrates the potential for significant future rises in these shortfalls. The report points out that if rent levels rise in line with recent projections of earnings increases, as they have in the past, by 2020 the typical weekly shortfall could be £19 per week. If Housing Benefit claimants are in accommodation above the 30th percentile, this shortfall will rise even further.

These shortfalls could result in significant difficulties for private tenants in sustaining their tenancies, or finding alternative private accommodation. The cuts and freezes of Housing Benefit could also affect affordability for social tenants, given Government plans to cap social rents at the Local Housing Allowance rate from 2018.

Housing Benefit in the Private Rented Sector

Since April 2008, Housing Benefit in the private rented sector has been paid using the Local Housing Allowance system. Under this system, Northern Ireland is split into 8 Broad Rental Market Areas (or BRMAs). The Housing Executive collects information on prices in the private rented sector every year, and sets a maximum level for the amount of LHA that someone can get – in 2008, this was the 50th percentile of the market, effectively meaning that LHA would pay for, at most, the cheaper half of the market.

Another feature of the LHA system was that a household would only be paid Housing Benefit for a certain number of bedrooms, depending on their needs. For example, an adult couple would only get enough Housing Benefit for a 1-bed house, or a single parent with 1 child would only get enough Housing Benefit for a 2-bed house.

Recent changes and cuts

Since 2010, there have been several changes and cuts to Housing Benefit for people living in the private rented sector:

• Since October 2011, Local Housing Allowance has been reduced to the 30th percentile of the local market. This means that instead of paying for the cheaper half of the local market, LHA now only pays for the cheapest 30%.
• Since January 2012, the “Shared Accommodation Rate” of LHA applies to claimants under 35. This means that Housing Benefit claimants under 35, living in the private rented sector, are only entitled to enough Housing Benefit to pay for a single room in a shared house.
• Since 2013/14, the uprating of LHA has been capped at the CPI measure of inflation (the lowest of the main measures of inflation). This is often lower than typical annual increases in rent.
• Since 2014/15, the uprating of LHA was capped at a maximum of 1%.
• From 2015/16, the LHA rate has been frozen for 4 years.
• In May 2016, the Benefit Cap was introduced to Northern Ireland; families affected by the Cap could see their Housing Benefit reduced to as little as £0.50 per week. (The Cap is mitigated fully in Northern Ireland, for families with children, until 31st March 2020.)

Worried about sustaining your home? Contact us

Housing Rights’ advisers deal with queries on housing and affordability every day. Call our helpline on 028 9024 5640 from 9.30am-2.30pm Monday  - Friday, and select option 3 to talk with an adviser. 

Housing Rights Private Rented Sector Conference 2016 

We will be holding our annual Private Rented Sector conference on Wednesday 23 November. This one-day conference will examine best practice for the private rented sector across the UK and Ireland. It will cover the key areas likely to be debated in government proposals expected to be published for consultation later this year. Focussing on key areas such as licensing and letting fees; supply and affordability, and; security of tenure and eviction, attendees can expect to learn more about the latest developments across the UK and Ireland.

10% off for all bookings made before the 7 October.