Options for reforming Local Housing Allowance

A study commissioned by Crisis has found that realigning Local Housing Allowance rates with market rents would generate significant benefits to the economy through reduced spend on homelessness services and social gains as a result of more positive health and well-being outcomes amongst claimants.

The research and modelling contained in Local Housing Allowance: Options for reform was carried out by Alma Economics and looks at a variety of options for addressing the mismatch between rental assistance benefits and the actual costs of renting.

Uprating of Local Housing Allowance rates

Local Housing Allowance rates are used to determine the maximum amount of benefit assistance a private tenant can receive with rental costs and are used in calculations of Universal Credit and Housing Benefit entitlement. Since 2011, the rates are supposed to reflect the 30th percentile of market rents charged in the claimant’s broad residential area. Previous to 2011, the rates were set at a more generous 50th percentile of local market rents.

The table below sets out policy changes to the way in which LHA rates are uprated. These changes, combined with the controversial benefit freeze mean that LHA rates are now far adrift of the 30th percentile in many areas of the UK.

2008            LHA rates introduced, initially set to cover rental costs in the lowest 50% of the market in a Broad Rental Market Area with bedroom entitlement capped at 7 bed properties

2011            LHA rate reduced from median to 30th percentile and LHA no longer set for properties with more than 4-bedrooms

2012            Government increases restrictions on housing benefit payable to young renters by extending the age limit for the Shared Accommodation Rate of LHA from 25 to 35 years of age

2013            Quarterly uprating of LHA ends and replaced by annual uprating. LHA rate capped at previous year’s figures plus CPI inflation

2015            Policy freezes LHA rates at 2015 levels with rates no longer subject to annual uprating, although legislation allows for uprating of 3% in limited circumstances.

Alignment of rent and LHA rates in Northern Ireland

Housing Rights has carried out research locally which shows that the rates are no longer properly aligned with market rents in Northern Ireland and found that 100% of LHA rates in NI fell below the 30th percentile in 2018 and over a quarter of LHA rates are now below the 10th percentile. This research will be launched and discussed at our upcoming conference on affordable housing, which will be jointly delivered with CIH NI.