Homelessness and the Private Rented Sector

New research commissioned by the Residential Landlords’ Association highlights the increase in homelessness acceptances from the private rented sector from 4,580 in 2009 to 16,320 in 2017, more than doubling in the proportion of all homelessness acceptances from 11% to 28%.

The research was conducted by Dr Chris O’Leary, Dr Susan O’Shea and Professor Kevin Albertson from the Policy Evaluation and Research Unit at Manchester Metropolitan University. It aims to discover what is driving the increase in homelessness arising from the private rented sector in England and Wales, but the findings have implications for all parts of the UK.

Report recommends fundamental overview of Local Housing Allowance

The recommendations arising from the report include:

• The need for a fundamental overview of the role and calculation of Local Housing Allowance (LHA).
• Local councils should use their powers to encourage the supply of accommodation at the LHA rate to ensure that fewer households face the prospect of funding a shortfall.

It is estimated that a quarter of households in the private rented sector are currently receiving help with housing costs calculated under LHA. There had also been an increase in the number of households accepted as homeless following the end of a private tenancy and the report points to the introduction of LHA as a major contributing factor from 2008 onwards and subsequent changes to the benefit since then which have had a major impact on the increase of homelessness arising from the private rented sector.

LHA was introduced in 2008 in the calculation of housing benefit paid to households renting in the private rented sector. Under this system, maximum levels of benefit can be paid to claimants, based on the size of accommodation the household requires and the area in which the rental property is located. Many tenants in receipt of LHA do not receive enough benefit to cover their contractual rent and must make shortfall payments to the landlord.  The report highlights that this shortfall affected two thirds of all households on the LHA rate.

According to this research, tenants in receipt of housing benefit were more likely to have their tenancy ended by the landlord as a result of rent arrears. This, they suggest, represented a ‘double whammy’ for such households, who were facing the loss of their tenancy as a result of rent arrears and also finding it more difficult to secure another tenancy at an affordable rent, resulting in homelessness.

Changing demographics in the PRS

One significant demographic change in the private rented sector has been the increase in the number of households with children who are renting privately, which increased by 175% in the ten years from 2006 to 2016.

Whilst security of tenure would undoubtedly be an issue for households with children, the report found that this was not a major cause of homelessness from the private rented sector and that the majority of tenancies were ended by the tenant rather than the landlord. However, when tenancies were ended by the landlord, the main reason for this was due to rent arrears. In this regard, the report highlights the role of Local Housing Allowance (LHA) in exacerbating rent arrears issues as the gap between market rents and LHA had been growing in recent years.

There was also an increase in the proportion of low-income households who might otherwise be eligible for social housing but due to lack of supply, were renting privately.