December 11th 2023
Rents to outpace rise in housing benefit rates over next two years
Record rent inflation in England will rapidly outstrip the increase in social security for renters announced in the Autumn Statement, leaving affordability for low-income households almost as bad as it is today after just 18 months, Generation Rent has warned.
The campaign group has forecast rent inflation of 8.5% between now and late 2025, taking rents 14.2% higher than the level used to calculate the support that private renters receiving Universal Credit or Housing Benefit will get from April 2024.
Generation Rent is calling on the government to permanently relink Local Housing Allowance (LHA) with actual rents, to help households on low incomes secure a tenancy and avoid the threat of eviction and homelessness.
LHA limits the level of housing benefit paid to privately renting tenants in most parts of the UK. Chancellor Jeremy Hunt announced in last month’s Autumn Statement that LHA would be increased to the 30th percentile of local rents, after a four-year freeze which saw average rents rise by 18.3% above the level of support originally set in 2019.
This freeze – a real terms cut – has driven tenants into rent arrears, while others struggle to secure a new tenancy they can afford. The most recent homelessness figures revealed that the number of households seeking homelessness support after the end of a private tenancy increased to its highest level on record in the 12 months to June 2023.
The chancellor’s LHA increase, which will be based on average rents in the year to September 2023, will take effect in April 2024. These new levels of support will be 13.3% higher than private renters on housing benefit currently get. But with no plans to raise the level of support in future years, the support level will once again be frozen at a time of rapidly rising rents.
Generation Rent has developed a model to predict rent inflation, as measured by the new rent index published last week by the Office for National Statistics (ONS), using wages, population and housing stock data. The campaign used this to forecast how much rents will rise in the coming years and how rapidly the chancellor’s one-off increase in LHA support will be eroded.
By the last quarter of 2025, rents in England are likely to be around 8.5% higher than they are today and 14.2% higher than the reference rents that will determine April’s new LHA rates. For those reliant on benefits, that will return housing affordability most of the way back to its current unsustainable levels just 18 months after the LHA increase takes effect.
At that point, the shortfall for a two-bedroom house across all rental areas in England is set to average £1,370 annually. For some, such as those seeking a new tenancy in late 2025, the shortfall could be significantly higher. And affordability for those on LHA will continue to deteriorate thereafter.
Dan Wilson Craw, deputy chief executive of Generation Rent, said: ‘Until we build enough social homes, millions of people on low incomes will rely on Local Housing Allowance to cover private sector rents. But the past failure of the government to take responsibility for record rent inflation has resulted in welfare support falling behind, and putting tenants at risk of eviction and homelessness.
‘Last month’s announcement of an increase in LHA is sorely needed but will be overtaken quickly by actual rents, and tenants facing painful decisions today will be in the same position in two years’ time. It is past time for the government to relink LHA with local rents permanently so support automatically adjusts to housing costs every year.’
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Autumn Statement: Jeremy Hunt has constructed short-term solutions to help people with housing costs