The Chancellor has revealed that the Local Housing Allowance (LHA) will be unfrozen and increased to the lower 30% of rents nationwide from April 2024 onwards.
The announcement, made in today's Autumn Statement and likely to cost the Government £1.25 billion next year, follows long campaigns by almost every group within the private rented sector, who have all been arguing that the gap between housing benefit and real-world rents has become so great that it has been driving homelessness.
Numerous bodies, including homeless charities, the representative bodies of local authorities and private landlords, are making the case for LHA rates to be uprated to cover at least the 30th percentile of local rents, alongside relinking rates to the real cost of renting for future years. The Chancellor has now done this.
Nevertheless, the LHA has been frozen since 2020, based on rents in 2018-19, while private rents have risen rapidly to their highest recorded levels.
Chancellor Jeremy Hunt said in parliament, that: “Because rent can constitute half the living costs of private renters on the lowest incomes, I have listened to colleagues and many organisations, who say unfreezing the LHA was an urgent priority.
“I will therefore increase the LHA to the 30th percentile of local market rates – this will give 1.6 million households £800 of extra support next year.”
But the Chancellor otherwise revealed no other major incentives for landlords. Two minor changes are that permitted development planning rules will be easied to make it easier to convert a single home into two dwellings - i.e. a house into two flats - and make it easier to get planning permission for a heat pump.
Lora Bencheikh, Group Executive Director of Caridon Property (pictured) adds: “The combination of high inflation and soaring rental prices means the freeze on LHA rates since April 2020 has effectively eroded the value of the financial support provided to people who qualify for housing benefit.
“The rising cost of living is making it impossible for some individuals and families to afford housing, and as a consequence there are rising rent arrears, evictions, homelessness and mental ill health.”
Gavin Richardson, MD of buy-to-let broker Mortgages for Business (pictured) says: "What the housing sector needed was an Autumn Statement that supported landlords. Instead we're still stuck in landlord limbo.
"Plans to abolish Section 21 ‘no fault’ evictions in the Renters’ Reform Bill are still on hold as we wait for the court system to be reformed.
"Currently, it takes six months for landlords to regain possession of their property following a legitimate claim.
"Landlords have lost confidence in the courts and are concerned about the security of their investments without Section 21 in place. We want the government to set an eight-week target for processing times for possession claims before abolishing Section 21. The buy-to-let community is still waiting for that.
"We wanted to see Capital Gains Tax relief being made available for landlords when they sell a property to a sitting tenant or first-time buyer — and then invest in a new property to let. That hasn't materialised.
"Landlords needed the Stamp Duty Land Tax surcharge reviewed. They didn't get it.
"And landlords needed Mortgage Interest Relief reviewed. Didn't happen.
"Without these changes, the private rented sector — which could help provide more homes while there is still an insufficient number to meet demand — continues to be damaged by the lack of long-term planning and collaboration.”
Richard Donnell, Executive Director at Zoopla (pictured) says in reaction to the LHA 'unfreezing': "Rents for homes across Britain have raced ahead of the growth in earnings over the pandemic.
"Resetting the local housing allowance in line with the market is an important first step to supporting those under the greatest pressure from the chronic supply/demand imbalance in the private rented sector.
"Longer term its vital that national and local government work to boost housing supply including homes available for rent to all types of household."
The boss of estate agency Yopa, Verona Frankish,adds: “Last Christmas, the government gave us property market turmoil as a consequence of the mini budget. This year, they’ve saved us from further tears, but they haven’t given us much else to shout about.”
Ben Beadle (pictured), Chief Executive of the National Residential Landlords Association, says: “We warmly welcome today’s announcement by the Chancellor, which follows extensive campaigning by the NRLA and others.
“Freezing housing benefit rates was always a disastrous policy, hitting as it did many of the most vulnerable tenants across the private rented sector. Taking steps to reverse this change will provide vital support for tenants who are in receipt of the LHA, making it easier for them to access and sustain rental tenancies.
"More generally, this will go a long way towards tackling homelessness across the UK.
“All parties now need to commit to ensuring housing benefits are uprated each year so that they continue to be linked to market rents.”