Simply indexing local housing allowance rates isn't good enough

The benefits freeze hasn’t ended for nearly 1.3 million private tenants claiming housing benefits. Local housing allowance (LHA) will be uprated by 1.7 per cent from April, but CIH says this doesn’t address the losses that have built up since the freeze started.

We want the government to reconsider its decision to uprate local housing allowance rates by the consumer prices index (CPI), without doing anything to address the decline in their real value that has occurred over the previous six years.

The decision to uprate LHA rates by CPI was taken last month and follows a four-year freeze and two years when the annual uprating was limited to one per cent, when inflation running at more than twice that amount. The new LHA figures were published on Friday. Our analysis of the new rates has confirmed our concern that increasing by CPI has virtually no impact on restoring LHA rates to their original value, which was to cover the rent on at least 30 per cent of homes (the ‘30th percentile’) in each local market. The government chose the 30 per cent benchmark because it was roughly equivalent to the proportion of private renters who claim housing benefit, so ensuring every tenant can afford a home.

But analysis of the new LHA rates in England shows that 95.9 per cent are still below the 30th percentile, compared with 96.7 per cent in April 2019 – the last year of the freeze. This improvement is barely perceptible.

The Office of National Statistics index of private rents shows that equivalent figure for rent inflation was 1.3 per cent - only slightly below the CPI figure of 1.7 per cent for September 2019 on which new rates are based. But this year was relatively unusual, as rents tend to rise in line with wages rather than prices, so if they return to their normal pattern in subsequent years even these tiny marginal gains would be completely wiped out.

CIH policy and practice officer Sam Lister said:

“Although LHA will be uprated from April, for nearly 1.3 million households the ‘freeze’ remains a reality, as our analysis shows CPI uprating merely locks in real-terms losses that have accumulated over the previous six years. Benefit claimants are expected to pay any rent shortfall out of their other basic benefits, which are meant to cover other essential household expenses. But since the freeze started, jobseekers have lost a whole month's worth of benefit out of their annual entitlement.”

The announcement of the new rates came just four days before today’s debate in Parliament about the LHA, which was secured by Caroline Lucas, the Green Party MP for Brighton Pavilion.