Rising rents and frozen benefits freezing people out of the housing market

11 July 2017

Growing numbers of housing benefit claimants living in privately rented homes are struggling to make ends meet against a backdrop of rising rents and frozen local housing allowance. 

Housing benefit payments will no longer cover the full rental bill for properties at the 30th percentile of local rents in over 99 per cent of England’s Broad Rental Market Areas, according to Policy Response: Impact of the LHA Freeze, published today by Savills in conjunction with the Joseph Rowntree Foundation. 

The local housing allowance, intended to be equivalent to the 30th percentile market rent since April 2011, was fixed in April 2016 and is frozen until 2020 to help control the benefits bill, having been increased by just 1 per cent a year in 2014 and 2015.  Private rents have risen at an average rate of 1.9 per cent in the 5 years to April 2016 and 3.1 per cent in London.  

“Already since the link between rents and benefits was broken in 2014 benefit payments are falling short of rents, particularly in markets where demand for rental property exceeds supply,” says Abigail Davies, associate director, Savills housing consultancy team.  “There are now hardly any Broad Rental Market Areas – less than 1 per cent – where the benefit payment covers 30th percentile rents for all property types.”

In around half of all local authorities in England more than 25 per cent of private rented households depend on housing benefit to help pay their rent.  The figure rises to 40 per cent of all households in around one in ten (9.2%) local authorities.  

The private rented sector is therefore a vital source of shelter for low income households, but the combination of rising rents and frozen housing allowance means that fewer private rented homes will be accessible to those on benefits and growing numbers will increasingly struggle to pay their rent.  

After only two years some large differences have opened up between the LHA and what it would have been had it moved in line with 30th percentile private rental growth.  Already, in 38 per cent of Broad Rental Market Areas the frozen LHA offers less than 90 per cent of the cost of rent for a 2 bed property at the 30th percentile of all local rents.   

And there are already 11 Broad Rental Market Areas where LHA for a room in a shared house is less than 80% of the rent for a property at the 30th percentile of all local rents, with the majority concentrated in London and the South and East of England.  

The figures can be stark (see examples in link below). For example, a single person renting a room in a shared house will need to find an extra £115 a month in outer south west London, and £48 in Sunderland.

For a one bedroom flat in central London, the figure rises to £617 per month and £158 per month in Cambridge, while a family in a 4 bedroom house in Milton Keynes, for example, already finds themselves having to make up £285 per month.

Click here for examples of the gap between the average 30th percentile monthly rent and the local housing allowance in different locations.

“In areas of high demand, tenants claiming benefits will find it increasingly difficult to pay rising rental bills, and fewer properties will be available to those unable to top up their rents from other sources of income,” says Davies. 

“This has implications for further market rent growth in locations where large proportions of rental households are reliant on housing benefit.  In other markets, where there are alternative sources of demand, benefit-reliant households will lose out.  And in the absence of any alternative demand, private landlords may choose to sell up rather than settle for low levels of rental growth.”

For further information click here

 

 
 

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