Housing benefit boosted – what it means for private rent

Chancellor Jeremy Hunt has announced that housing benefits for private renters will be boosted in his Autumn Statement.

Local Housing Allowance (LHA), the cap on the amount of housing benefit tenants in the private rented sector can receive, was designed to cover rental costs in the cheapest 30 per cent of properties in an area.

But it has been frozen since 2020 despite private rents rising sharply to their highest recorded levels.

What has changed?

Mr Hunt said that he would increase the local housing allowance rate to the 30th percentile of local market rental rates as the Chancellor insisted he was part of a “compassionate Conservative government”.

On private rents, Mr Hunt said he had heard representations from the Institute for Fiscal Studies (IFS), anti-poverty charity the Joseph Rowntree Foundation and Citizens Advice on the need to unfreeze LHA as an “urgent priority”.

He said: “I will therefore increase the local housing allowance rate to the 30th percentile of local market rents.”

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LHA is used to calculate the housing benefit element of Universal Credit, which Mr Hunt said would be raised by 6.7 per cent, in line with September’s inflation figure.

It was set at 30 per cent of the average cost of rental properties within a given area based on a survey of rents in 2019-20.

But ballooning rent rises mean it no longer covers the cheapest third of the market in many parts of the country.

What was predicted?

The Chancellor was predicted to be weighing up whether to boost the LHA to help low-income families with rising rents.

The mooted move was understood to have been considered following pressure from ministers, local councils, and homelessness campaigners.

Homelessness charity Crisis has warned that lower-income private renters face a benefits “black hole” if the Treasury does not increase the benefits cap.

i’s housing correspondent Vicky Spratt reported how the Department for Work and Pensions (DWP) and Levelling Up Secretary Michael Gove are understood to have pressed the Treasury on the issue, urging them to unfreeze LHA.

How does this impact your money?

Mr Hunt said the move unveiled today would give 1.6 million households a boost of £800 on average next year.

LHA rates are based on private market rents being paid by tenants in a Broad Rental Market Area (BRMA). This is the area within which a person might reasonably be expected to live.

These rents are based on the number of bedrooms a claimant needs, the rent they pay and the area in which they live.

According to the Institute for Fiscal Studies (IFS), when LHA was frozen in April 2020, it covered around a quarter of private rented properties, but that had fallen to just one in 20 in 2023.

IFS economist Paul Johnson posted on X/ Twitter: “Unfreezing local housing allowance and increasing to 30th percentile of local rents is an important and welcome change.

“Chancellor cited @theifs work which showed that only 5 per cent of properties were covered by LHA due to long term freeze.”