Letting agents are urging the government to boost Local Housing Allowance (LHA) each year to keep pace with market rents.
Giving evidence to the DWP Commons Committee hearing on UK benefit levels, Timothy Douglas, Propertymark's head of policy and campaigns, said it must increase housing options for the most vulnerable by setting LHA at the 30th percentile, if not the 50th.
LHA rates are based on private market rents being paid by tenants in the area within which a person might reasonably be expected to live, and the local allowance is based on the 30th percentile on a list of rents in the area.
This is because housing benefits or universal credit payments are capped by LHA rates which were last updated in March 2020 to cover the rent for the cheapest 30% of properties in each local authority - in effect freezing them.
Benefits are not keeping up with rising rents, he told MPs, and further pressure has been put on the PRS because of low social housing stock, leading to vulnerable tenants being priced out of the market.
“The decision to phase out Mortgage Interest Relief and other unfavourable taxation policies is resulting in landlords facing unprecedented financial challenges,” said Douglas.
“If a decision not to implement a pro-growth taxation agenda for the private rented sector is not brought forward, it will be the most vulnerable tenants who are negatively impacted, many of whom are in receipt of benefits.”
Research by the Chartered Institute of Housing and Shelter found that fewer than one in five private rental properties in England were within LHA rates last year and that the average renter now faces a £151 monthly shortfall because it fails to cover their costs.
Earlier this year, the NRLA also criticised the government for its complacent attitude to the LHA freeze and its effect on both tenants and landlords.
Douglas also called for a change in rhetoric, and for policymakers to view private landlords and letting agents as part of the solution to resolve the housing crisis.