London boroughs have called on Whitehall to lift the Local Housing Allowance to at least 30% of local market rates for private sector accommodation to help ease the pressure on councils.
The call came from local authorities in London in response to a report that found Londoners receiving Universal Credit are unable to afford the majority of rented homes in the capital.
Local Housing Allowance rates set the maximum amount of financial support someone can receive towards covering the cost of their rent in the private rented sector.
Originally, these rates were calculated to cover local rents within an area at up to 50% of the market, and a household size of up to five-bedrooms.
In 2011, the rates were changed so that they were calculated to cover local rents up to 30% of the market and a household size of up to four-bedrooms.
From 2013, however, the Local Housing Allowance rates were no longer calculated to cover up to 30% of local rents in an area but were instead increased by the Consumer Price Index.
According to a new report from the homelessness charity Crisis, this index is ‘a much poorer indicator of changing rental prices’, and it means that the Local Housing Allowance rates became ‘detached from local private rents’.
The pegging of rates to CPI meant that they only increased by a small amount before they were finally frozen completely in 2016.
‘The cumulative effect of policy changes to Local Housing Allowance rates since 2011 has resulted in a significant erosion of the support people can receive from the Government to help with the cost of their rent,’ the Crisis report says.
The Government has introduced Targeted Affordability Funding to mitigate the worst impact of these cuts.
However, despite this move, Crisis argues that ‘underinvestment in Local Housing Allowance rates continues to negatively impact the ability of private renters to cover the cost of their rent and secure their home.’
In response to the report, London Councils, the cross-party organisation which represents local authorities in the capital, called on the Government to lift the Local Housing Allowance to at least 30% of local market rates for private sector accommodation.
‘Crisis’ research confirms what London boroughs have long experienced,’ said Cllr Muhammed Butt, London Councils’ executive member for welfare, empowerment & inclusion.
‘The freeze in Local Housing Allowance rates combined with year-on-year rent increases means that fewer and fewer properties are affordable to low-income households in the capital.
‘Too often, the result is Londoners going into rent arrears and ending up homeless. This is a terrible situation for Londoners to find themselves in. It also puts huge pressure on councils, who take responsibility for those made homeless and ultimately have to pick up the bill.
‘The upcoming Spending Review is an opportunity for the government to put a stop to this spiralling problem. Ending the Local Housing Allowance freeze and restoring rates to ensure that at least 30% of the market is affordable to claimants would be a massive boost to boroughs’ efforts to tackle London’s homelessness crisis.’