We have called for the Local Housing Allowance to be unfrozen so that benefits are more closely aligned with the rate of rent in an area
Wera Hobhouse is the Liberal Democrats’ Climate Change and Transport Spokesperson and MP for Bath
Local Housing Allowance looks set for another long-term freeze under the Conservatives and vulnerable renters are once again going to suffer most. In 2020 the rate was finally unfrozen and matched the 30th percentile for market rents. This meant that benefit claimants could access the bottom median 30% of the private rental market without supplementing rental costs themselves from other income. A four year freeze preceded this return to the 30th percentile and since 2020 it has been frozen once more. As a result, the gap between housing support and rents is reopening.
I have heard consistently from my constituents how difficult it has been for many to cover the bills in recent months and the freezing of the Local Housing Allowance is only adding to these problems. Rents in my region, the South West, have shot up by almost 9.7% in the past year. The poorest 10% of households are on average spending more than their income on just the rent, energy and food. These three things cost 115.8% of the lowest decile of incomes in the South West of England. Across the UK, the cost of private renting means that private renters’ budgets are more stretched than other tenures. Private tenants on the lowest 10% of incomes are facing combined rents, food and utility costs that exceed their total incomes by 43%. The Government’s own rough sleeping statistics have found that in my region, rough sleeping has increased by 24% in the last year.
This lays bare the financial pain that so many are facing just to cover the rent. Unfreezing the Local Housing Allowance would go someway to mitigating this. In October last year, my local authority of Bath and North East Somerset, saw renters who need Local Housing Allowance to get by facing an annual shortfall of £588 for a one bedroom house, rising to £2,079 and £3,851 for two and three bedroom homes. This has reduced the proportion of private rented homes that are affordable to people on housing benefit to 9% of listings that year, down from 13% just 5 months earlier.
If this freeze does turn into another long term one the picture is bleak for those who rely on Local Housing Allowance to pay their rent. Research conducted by the Local Government Association (LGA) found that in 2020, when the benefit had been stagnant for four years, there were many parts of the country where no properties were available to people entitled to full support with their housing costs. The same research provided strong evidence that the freeze drove increased homelessness, as we are seeing now. The associated additional costs of homelessness for councils, drove resources away from preventative support for those struggling with rent and fuelled a vicious cycle for households and councils.
As I have laid out, the same problems are beginning to repeat themselves but this time threatens to be worse. Councils now have less tools to fight homelessness and supplement housing costs. This year there was a reduction in the Discretionary Housing Payment (DHP) which enables councils to provide vital, short-term support to some households to help them make up shortfalls. In some cases that benefit is now being used in the long term to plug gaps that people have no realistic chance of closing. That is not the intended purpose of the DHP. It is meant to help households adjust as they go through a temporary cash flow issue.
Councils are now also reporting huge supply and affordability issues in the private sector, which is becoming an unfeasible option for those reliant on housing related benefits. Capital Letter research in June 2022 found that London rent prices had increased by 15.8% in just one year. Part of the reason for the rents increasing has been the shortfall in supply. The number of properties listed to rent across London in the first quarter of 2022 was 35% lower than the pre-COVID quarterly average. Shelter has reported that nationally, as a result of skyrocketing rent prices and other cost of living issues, there has been a 24% increase in the number of people struggling to pay their rent compared to last year.
Councils are now getting more and more desperate as they try to combat these spiralling housing issues. Temporary Accommodation (TA) is becoming a major concern. The number of households in TA has almost doubled in the last decade. Up from 55,000 in 2013 to 100,000 at last count. This includes 125,000 children. The costs associated with addressing the problem are massive. In 2020/21, councils spent £1.6 billion on TA use. As more families inevitably face difficulties paying the rent, councils will encounter more and more problems in accommodating them properly.
This is a mounting crisis and one that the Liberal Democrats have a plan to address. We have called for the Local Housing Allowance to be unfrozen so that benefits are more closely aligned with the rate of rent in an area. To tackle the housing supply problem which is driving up the cost of rents so quickly, we would ensure that 150,000 social homes were built every year. These homes would be secured with investment from our proposed £130 billion capital infrastructure budget. We have also repeatedly called on the Government to tackle the Land Compensation Act to bring down unrealistically high land values and to make more land available for developing more affordable homes.
All these actions would alleviate the pressure on stretched council budgets and most importantly ensure a stable housing situation for some of the most vulnerable in society.
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