UK Government must act to help low-income private renters.

As the Budget on October 30 approaches, the Joseph Rowntree Foundation (JRF) has issued a warning that up to 20,000 low-income private renters, including 10,000 children, could fall into poverty in 2025/26 if the UK Government does not take action to unfreeze Local Housing Allowance (LHA).

A recent study conducted by Manchester Metropolitan University (MMU) and commissioned by JRF reveals that failing to unfreeze LHA would result in private renters being, on average, £243 worse off in 2025/26. This impact is even more significant for a working-age couple with children, who could be £340 worse off during the same period.

If the current trend continues, by the end of the 2029 parliament, the average private renter could be £703 poorer each year. Additionally, 50,000 more private renters, including 30,000 children, might be pushed into poverty. Meanwhile, 60,000 more individuals, including 10,000 children, could slide into deep poverty, with a staggering 80,000 people, including 30,000 children, facing very deep poverty.

The research underscores the severe consequences of LHA freezes on private renters, who have had to cover the gap in rent costs as they rise, while LHA and housing support have remained stagnant.

Recent data from the Office for National Statistics (ONS) indicates that private rents in Great Britain surged by 8.4%, equating to an average increase of £93 per month, in the year leading up to September 2024. The situation was even more concerning in London, where rents soared by an average of £177 per month.

The Current Freeze

Local Housing Allowance (LHA) serves as the benchmark for determining the maximum housing support available to private renters receiving Universal Credit or housing benefit.

Currently, LHA is frozen at the 30th percentile of April 2024 rents in cash terms, a policy decision carried over from the previous government, as reflected in the Office for Budget Responsibility’s (OBR) fiscal forecasts. Without intervention from the current government, LHA levels are poised to remain frozen indefinitely.

In addition to the freeze, several policy adjustments to LHA made since 2011 have had detrimental effects on private renters. These include switching from monthly to annual LHA upratings and pegging the uprating to the Consumer Price Index (CPI) instead of local rent rates.

As a result of these policy changes since 2011, the average private renter relying on housing benefit could find themselves £684 worse off annually by April 2025 compared to the scenario if the 2010 policies had been maintained.

Collectively, these alterations have cost private renters nearly £1 billion, with varying impacts across demographics. For instance, the shortfall increases to £887 per year for a working-age couple with children and £957 per year for households with Black adults.

JRF is urging the government to use the upcoming Budget as an opportunity to break away from previous housing benefit policies. The organisation stresses the importance of permanently linking LHA to local rent rates to prevent an additional financial burden on low-income private renters.

Rachelle Earwaker, a senior economist at JRF, emphasised the necessity of providing stability for private renters until more social housing becomes available. She pointed out that the government’s commitment to reducing child poverty and homelessness is at stake, with a potential 80,000 more private renters facing severe hardship if LHA remains frozen.

Earwaker added, “This Budget represents a crucial juncture for the government to make a meaningful impact against hardship in the UK by reintegrating LHA with local rents.”