Chancellor Jeremy Hunt is facing a crucial decision regarding whether to provide a boost to housing support for benefit claimants in the upcoming Autumn Statement this week. The proposal to unfreeze the Local Housing Allowance, stagnant since 2020, has gained support from key figures like Levelling up Secretary Michael Gove and Work and Pensions Secretary Mel Stride.
The Local Housing Allowance rate, which supports individuals on housing benefits or Universal Credit in the private rental sector, has remained frozen in cash terms since 2020. Meanwhile, living costs, especially rents, have skyrocketed, posing a significant challenge for those reliant on benefits in the private rental sector. London Councils and Alma Economics have conducted an analysis revealing that the government’s freeze on the London Housing Allowance places up to 60,000 Londoners in jeopardy of homelessness.
According to a report by the Institute for Fiscal Studies (IFS), rents for new lets have increased by more than a fifth since the housing allowance freeze. Private rental prices rose by 4.4% in the 12 months leading up to January 2023, making housing even less affordable for those on benefits.
The freeze on the housing allowance has resulted in a diminishing number of people on benefits who can afford to rent and a shrinking pool of landlords willing to let to tenants in receipt of housing benefit for fear of rent arrears.
According to the IFS, the proportion of new private rental properties considered affordable for those on benefits fell from 23% to 5% in just three years, exacerbating the struggle for affordable housing among low-income households.
Boosting housing benefits is essential to address the rising living costs, especially in the context of soaring rental prices. An increase in housing allowance would provide much-needed relief to individuals and families struggling to make ends meet.
We need an immediate government response to update the housing allowance in line with current market rents, preventing homelessness. As others have also pointed out, whilst we recognise that increasing the allowance incurs significant cost, this expense is incomparable to the short and long-term costs associated with homelessness which leads to extended stays in hospitals, prisons, or on the streets, incurring greater costs to the public purse.
The analysis by London Councils and Alma Economics estimates potential savings of £80 to £107 million per year, with broader social benefits, including healthcare and criminal justice savings, valued at £1.2 billion.
Boosting housing benefits, particularly by unfreezing the Local Housing Allowance, is a necessary step in mitigating the financial hardships faced by low-income families. By doing so, the government can demonstrate its commitment to supporting vulnerable populations and fostering a more inclusive and equitable society which aligns with the government’s commitment to ‘levelling up’.