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What is Local Housing Allowance?

Local Housing Allowance (LHA) is not a benefit. In areas accross the UK, it sets the maximum amounts of housing support claimants of Universal Credit and Housing Benefit can usually get for private rented homes of different sizes.

In the 2023 Autumn Statement, the Government announced an end to a four-year cash freeze in LHA rates. From April 2024 rates will be determined by:

  • The size of property a household is entitled to, with bedroom entitlement based on family size and characteristics.
  • The 30th percentile rent for properties of different sizes within each local “Broad Rental Market Area” (BRMA) based on rents surveyed in the year to September 2023, up to national maximum amounts.

LHA was last set at the 30th percentile of local rents in April 2020. The freeze meant rates were not increased with inflation or rising rents.

If a claimant’s rent is higher than the relevant LHA rate in their area, support is capped. If rent is lower, support is determined by eligible rental costs.

Support for tenants in social housing does not use LHA. Instead, it is based is on actual rental costs with deductions made in some cases, such as where the under-occupancy deduction applies.

LHA rates and maps of Broad Rental Market Areas can be found on Directgov.

Why was LHA introduced?

Before the deregulation of private rents in 1989, Housing Benefit was calculated in the same basic way for renters in the social and private rented sectors. Building on earlier reforms, LHA was designed to control public spending on housing support, prevent rises in unregulated rents from being fully covered by Housing Benefit, and discourage benefit claimants from living in more expensive properties than they need.

It was rolled out nationally for new claimants in the deregulated private rented sector from 7 April 2008. The reasons for its introduction also included making the level of Housing Benefit more consistent and fairer within localities, and improving transparency about the level of support available.

Reforms to LHA since 2008

LHA has been reformed significantly since it was introduced. The highest-profile reforms have been to how the level of LHA has been set.

Changes to the level of LHA  

Before April 2011, LHA was based on median rents of properties of the same size in each local area, determined by government Rent Officers. The median (or 50th percentile) rent is the value at which half of rents are higher, and half of rents are lower. In April 2011, the level of LHA was reduced to the 30th percentile, so LHA would cover the lower 30% of rents in each area.

Since April 2012, there has been no automatic link between LHA levels and changing local rental prices. Instead, different uprating decisions have been made periodically, with no statutory or customary default.

The chart below summarises the annual changes in LHA rates since April 2013. LHA was increased by the Consumer Price Index in April 2013 and by 1% in the two following years. In the four years from April 2016 LHA was frozen in cash terms along with most working-age benefits, with “targeted affordability funding (PDF)” in some high rent growth areas.

As a response to the coronavirus (Covid-19) pandemic, LHA was returned to the 30th percentile of local rents in April 2020. It was then frozen in cash terms until 2024, when it was again returned to the 30th percentile.

Notes: 2020/21 figures show the average change in LHA rates across all BRMAs compared to 2019/20. The 2024/25 figure assumes that 30th percentile rents increase in line with the ONS Index of Private Housing Rental Prices for the 12 months to September 2023.

Source: Adapted from Figure 1 of Clegg A, A temporary thaw: An analysis of Local Housing Allowance uprating over time, Resolution Foundation, 9 December 2023.

Other key reforms

Other changes since 2008 have included:

  • The removal of “keeping the difference” of up to £15 per week in April 2011. Initially claimants could keep an amount of housing support if their rent was below the relevant LHA. It was hoped this would encourage people to choose less expensive accommodation.
  • Reducing the maximum size of property a household would be eligible to claim support for, to five bedrooms from April 2009, and four bedrooms from April 2011.

Current issues and debate

The impact of returning LHA to the 30th percentile in April 2024

The Department for Work and Pensions has estimated that 1.6 million households will gain from returning LHA to the 30th percentile in April 2024, and on average these households will benefit by £785 in 2024/25. The annual cost of this increase (as opposed to remaining at the 2020/21 levels) is forecast to be around £1.3 billion in 2024/25, gradually increasing to £1.7 billion by 2028/29.

Campaigning groups and think tanks, as well as organisations representing tenants and landlords, welcomed the decision in the Autumn Statement 2023 to return LHA to the 30th percentile of local rents from April 2024.

However, concerns remain that some claimants, particularly families with children, will not benefit in full from the increase in LHA because they will be subject to the benefit cap. There are also fears that, with LHA rates expected to be frozen from April 2024, any continued rent rises could result in growing gaps between support and rents as seen during previous freezes.

The size of Broad Rental Market Areas (BRMAs)

The size of BRMAs means they can incorporate multiple areas with a wide range of rental prices. This has led to concern over the degree to which wealthy areas with high private sector rents can inflate LHA rates within a BRMA. In other BRMAs, concern focuses on the impact of less wealthy areas which decrease LHA rates, making the private rented sector less accessible for those who rely on benefits to help with rent payments.

Rent Officers are required to review BRMA boundaries as often as it is thought appropriate with suggested changes subject to the agreement of the Secretary of State.

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