Local Housing Allowance and the social rented sector

Housing Benefit claimants living in the social rented sector have generally not faced restrictions on the level of rent that can be considered as eligible rent for Housing Benefit purposes, aside from when they are of working-age and are under-occupying their homes.

During the Spending Review and Autumn Statement 2015 George Osborne announced an intention to restrict the level of Housing Benefit, or the housing element of Universal Credit, claimed by tenants in social housing (council and housing association stock) to the Local Housing Allowance (LHA) rate. LHA rates currently apply to most Housing Benefit claimants living in the private rented sector and entitlement is related to household size.

Social sector landlords were concerned that this would result in shortfalls between the rent due and claimants’ entitlement to Housing Benefit. This could, in turn, result in rent arrears and impact on landlords’ revenue streams, in addition to increasing the risk of homelessness for affected tenants. There were concerns that it would impact people who are not of working-age and who are exempt from the under-occupation deduction from Housing Benefit (‘bedroom tax’/Removal of Spare Room Subsidy). The introduction of the Shared Accommodation Rate into the social rented sector for single people under-35 was also viewed as a key risk.

Applying LHA rates to the social rented sector was likely to have most impact where social sector rents are closer to market levels. Particular concerns were raised about the impact of the measure on supported housing providers – this issue is covered in a separate Library briefing paper: Paying for supported housing.

During Prime Minister’s Questions on 25 October 2017, Theresa May announced that LHA rates would not be applied to supported housing, nor would they be applied to general needs social housing. This was confirmed in a further consultation paper published on 31 October 2017:

In the Autumn Statement 2015, we announced our intention to apply the Local Housing Allowance rates to social rents, including supported housing, with effect from 2018. The implementation date was subsequently deferred to April 2019.

Since then, we have listened carefully to the concerns raised by the social housing sector and other key stakeholders about the issues that this measure would present. As the Prime Minister has recently announced, in response to those concerns the Government will not apply the Local Housing Allowance rates to tenants in supported housing, nor to the wider social rented sector.

The sector welcomed this announcement.