Method note: What could be the impact of freezing local housing allowance for four years

By: Jenny Pennington
Published: October 2015

Method Note: What could be the impact of freezing local housing allowance for four years?

One and a half million households in the private rented sector (PRS) in England claim housing benefit to meet their housing costs. Rents are rising in the majority of the country - in some areas by as much as 8% each year. Many families are priced out of homeownership and there is a shortage of social rented housing. More and more working private renters now claim housing benefit to bridge the gap between wages and high rents.

The maximum amount of housing benefit support that private renters can claim is calculated by 'local housing allowance' (LHA). LHA rates are calculated for every local area based on local rents for different property sizes. The amount of support a family can claim will depend on where they live, how many bedrooms they need and their income.

The emergency budget announced that working age benefits - including Local Housing Allowance (LHA) rates - will be frozen at 2015/16 levels for four years from April 2016. This means maximum LHA rates will stay the same until April 2020 even if rents in an area increase. We are worried that freezing support for families increases the risk of homelessness and does little to tackle the housing shortage that is ultimately driving benefit claims.

In order to estimate the impact of this we compared the amount of support that a small family would be eligible for and our projections of the cost of renting a two bedroom home in the cheapest part of the market in each area by 2019/2020.