Below 9% of private rented homes in Britain likely to be affordable under new LHA rates

Now, analysis by Savills has found that the new rates, which come into force from 1 April, would cover just 8.5 per cent of properties in Britain, based on Zoopla data for private rent sector (PRS) listings in 2023. That compares with the target for the rate to cover the lowest 30th percentile of PRS properties – ie that at least 30 per cent of privately rented homes should be affordable in any area.

The authors acknowledge that new Zoopla rental listings do not provide a perfect representation of the whole rental market, but conclude that they provide a good indication of the rental levels housing benefit claimants face when looking for a privately rented home.

The latest briefing paper comes after Savills published findings in February that the rise in LHA averages just 17 per cent across Britain, or £110 per month. 

This compared with average growth of private rents of 29 per cent in the period from April 2020 – when the current LHA rates were set – to November 2023.

In its latest analysis, published last week (18 March), Savills found that Scotland had the highest proportion of affordable PRS listings, at 14.9 per cent, followed by England at 8.2 per cent. Meanwhile, Wales had the lowest proportion of affordable listings, at 5.5 per cent. Savills also highlighted that, significantly, “no area in Britain achieves the 30 per cent target for affordability”, while Lincoln, in the East Midlands, comes closest with a coverage of 24.5 per cent of new listings.

Property size

The size of property was also found to impact affordability significantly. LHA rates covered more one-bedroom properties than any other size of property, at 15.7 per cent. This was followed by four-bedroom homes at 9.8 per cent.

Meanwhile only 4.8 per cent and 4.3 per cent of listings for two-bedroom and three-bedroom properties respectively would be covered by the new LHA.

Savills notes that these sizes of homes are often the most in-demand, with 59 per cent of housing benefit claimants within the PRS having at least one dependent child, according to the English Housing Survey 2022-23.

Steve Partridge, a director at Savills Affordable Housing Consultancy, said: “Issues of affordability are not exclusive to those reliant on LHA or the private rented sector. They impact all tenures and are a result of a shortage of supply of housing to both rent and buy, combined with a spike in housing demand. This emphasises the need for delivery of more homes of all tenures. 

“Increased housing supply would also help reduce the numbers of people living in temporary accommodation. According to government figures, there were 105,750 households living in temporary accommodation in England in 2023. This was the highest level on record and 10.5% above the year before.”  

Hear more from Savills on rents, along with fellow speakers Peter Benz, chief financial officer of SNG, and Josie Parsons, chief executive of Local Space, by attending a session entitled ‘Creatively addressing the challenges of rent setting – together’ at the Social Housing Finance Conference, taking place on 8 May in London. Dive into the detail of the current challenges and join the discussion on what is needed to reach a stable and sustainable footing in the long-term. For more information, click here.