Local housing allowance (LHA) rates – which govern the maximum
amount of support for their rent that low-income private renters
can get – have been frozen in cash terms since April 2020. But
rents for new lets have increased by more than a fifth on
average. The result is that the proportion of new private rental
properties on Zoopla affordable to housing benefit or universal
credit recipients – i.e. with rents that can be covered by the
LHA – has plummeted from 23% to 5% since the
freeze. Given that 38% of private renting households (2 million)
are on housing benefit, this sharp reduction in affordability
could lead to demand for affordable properties far outstripping
supply.
This is the lowest level on record. While there is some variation
between the nations and regions, this decline in
affordability has been felt across Britain, with the
share of properties that are affordable for benefit claimants
ranging from 2.5% in Wales to 6.9% in the North East.
These are among the findings of new analysis by IFS researchers,
funded by the Joseph Rowntree Foundation, which investigates the
affordability and quality of private rental housing for
low-income people.
Other findings include:
- As the pool of affordable properties has shrunk, the quality
of these properties relative to the average has declined. By
2023Q1, affordable properties had 19% higher heating and
hot water costs than the average, a gap that has grown
as rents have raced ahead of housing benefit entitlements. Given
the huge increases in energy costs, this will have hit those who
do manage to find ‘affordable’ accommodation especially hard.
- Low-income families in private rented properties were in any
case much more likely than social renters or
owner-occupiers to be living in homes that are
hazardous, in disrepair, difficult to adequately heat or
lacking modern facilities. Around a quarter of
private rented homes lived in by low-income people
would fail the Decent Homes Standard which
social rented properties are legally required to meet, compared
with just 18% of owner-occupied homes and 12% of social rented
homes.
- The state of the private rental sector has become more
important for understanding the nature of poverty in recent
years, as it has filled the gap left by decreasing
homeownership rates among low-income families since
2008. Younger low-income people are especially likely to
be living in private rented accommodation. Half of lower-income
25-year-olds born in the 1980s are private renters. At the same
age, 26% of those born in the 1970s and 13% of those born in the
1960s were private renters.
Tom Wernham, Research Economist at IFS and co-author of
the report, says:
‘Compared with homeowners, renters in the social and private
sectors face higher rates of poverty and lower living standards.
With housing support frozen and falling well behind rents, only 1
in 20 newly listed private rental properties could be covered by
housing benefit. And the properties that are covered by benefit
rates are of lower quality and more expensive to heat than the
average. If these benefit freezes are maintained, private rents
will become increasingly unaffordable for those on low incomes.’
Darren Baxter, Principal Policy Adviser at JRF,
says:
‘Private renters on low incomes are seeing the number of
properties they can afford shrink dramatically as housing benefit
fails to keep pace with soaring rents. Clearly, the government’s
freeze on local housing allowance (LHA) is unsustainable.
‘Even if renters can find somewhere affordable to live, it’s
likely to be a home that’s unsafe or in disrepair. These homes
are also harder to heat, leaving renters facing energy bills they
just can’t afford.
‘As more people on low incomes rent privately, it’s crucial that
the government unfreezes LHA and ensures it reflects market rents
so that families aren’t forced to choose between homes that are
unsafe or homes they can afford.’
ENDS
