LHA increase will fail to deliver support needed, research finds

In research published on Thursday (1 February), Savills found that the increase across the UK averages 17 per cent, or £110 per month, but this is less than the 29 per cent average growth in private rents in the period from April 2020 to November 2023.

The firm said that many areas will see much lower increases to LHA despite “significant rental growth” that reflects continued constraints on the availability of privately rented housing in many areas.

In Ceredigion in Wales, Darlington in England, and Dumfries and Galloway in Scotland, rates will rise by just seven per cent, equating to less than £30 more per month. However, these areas have had rental growth of 20, 16 and 12 per cent respectively since the rates were last increased, Savills has found.

Steve Partridge, a director at Savills Affordable Housing Consultancy, said: “While the increase in LHA rates is welcome and widens the choice of private rental homes available to people on the lowest incomes, significant challenges remain.

“Our analysis suggests private rents continue to rise faster than LHA rates, on average, and in almost all parts of the country. As a result, those reliant on housing benefit will continue to struggle in the highly competitive private rented sector.

“Private rents will remain out of reach for most and particularly for homeless households that local authorities are trying to move out of temporary accommodation. A policy emphasis on supply that provides substantially more much-needed affordable housing across all tenures is required to alleviate pressure and continue to improve access to private rented homes.”

In addition, an analysis of the government’s indicative LHA rates from social impact real estate group HSPG, published on 30 January, found that affordability in London will remain restricted.

The firm said that the LHA increase will grow the pool of properties available to renters and improve the financial viability of registered providers.

It added that Manchester, Leeds, Wakefield and Oldham are among the areas that will benefit from the greatest uplift.

Meanwhile, affordability in London is still restricted, with LHA failing to cover the 25th percentile rent in roughly a third of areas, HSPG said.

Guy Horne, co-founder and chief executive of HSPG, said: “Unfreezing LHA rates is a really welcome move from government.

“Our analysis finds that, based on the government’s indicative LHA rates, affordability should increase by around a quarter in England, which will increase financial viability for registered providers of social housing which can continue to tackle the housing crisis.

“The picture in London remains a significant challenge, though, with roughly a third of areas still not being covered by LHA. As the government looks to maintain momentum on improving housing affordability for those who need it most, we suggest more frequent reviews of LHA rates.”