Renters impacted by frozen local housing allowance (LHA) rates have seen a decrease in their disposable income by nearly £1,500 per year, researchers say.

According to researchers from the Institute for Fiscal Studies (IFS) think tank, average rents have risen by 19% since the assessments of the year preceding September 2023 which have determined current LHA rates.

The disparity has resulted in ‘significant shortfalls between claimants’ rent and the support they can receive’, the think tank suggests, while disposable incomes of those affected have reportedly decreased by almost 6% annually.

With allowances having last been reset in April 2024, the think tank has proposed that ‘LHA rates should be regularly and locally uprated’.

The authors of the report, Jed Michael and Tom Wernham, argue that ‘the current pattern of resetting rates to the 30th percentile every few years, then freezing them indefinitely and only uprating them occasionally on an ad hoc basis is incoherent policy design’.

Jed Michael, Research Economist at IFS, said: ‘With large increases in rents since local housing allowance rates were last updated, the Chancellor is facing calls to increase them once again. However, in a tight fiscal environment, she will need to balance these calls against a huge range of competing priorities.

‘But regardless of whether the government wishes to increase support for private renters, calculating support using increasingly historical and irrelevant data on local rents is indefensible. Instead, support should relate to current rents.

‘Depending on the overall level of generosity chosen, the Chancellor could make this improvement without spending a penny. This would end the cycle of ad hoc uprating and freezing which creates uncertainty for the public finances and tenants, who currently face a postcode lottery of support across areas.’

Cllr Tom Hunt, Chair of the Local Government Association’s Inclusive Growth Committee, commented: ‘It makes no sense that the rates that councils are receiving from Government are a decade and half old – the LHA rate must be brought into line with the current reality.’

He added: ‘The Chancellor must use the Budget to undo this immediately. Not only will it mean councils can address the housing crisis more effectively, it will mean that they can focus on investment to drive growth and prosperity for their communities.’