There has been a "huge sigh of relief" from private renters as chancellor Jeremy Hunt announced that the freeze on Local Housing Allowance will be lifted in his 2023 Autumn Statement.
"Because rent can constitute more than half the living costs of private renters on the lowest incomes I have listened closely to many colleagues as well as the Institute for Fiscal Studies and the Resolution Foundation, citizens advice UK and the Joseph Rowntree Foundation who said that unfreezing local housing allowance was an urgent priority," said Hunt.
"I will therefore increase the Local Housing Allowance rate to the 30th percentile of local market rents.
"This will give 1.6 million households an average of £800 of support next year."
However, the increase may only be a one-off.
Prior to the freeze, benefits to cover the least expensive 30 per cent of the market was rest each year. The raise, which will come into effect next year, will bring the allowance back in line with contemporary rents, but will hold at that rate once more.
"This increases welfare spending by amounts that rise to £1.7 billion in 2028-29," the Office for Budget Responsibility said in their report on the 2023 Autumn Statement.
"The measure also freezes LHA rates from 2025-26 onwards, thereby eroding its generosity over time as rental prices rise."
So what is Local Housing Allowance, and how will this change to housing benefits help Londoners?
"This will give 1.6 million households an average of £800 of support next year."
Local Housing Allowance, or LHA, is the rate used to work out what you can claim in financial help from the government when renting from a private landlord.
It is based on the number of bedrooms and accounts for ages of household members, disability, care history – and local rent rates.
Local Housing Allowance has been frozen since 2020 and is based on rents from three years ago.
In London, where rents have soared by since pre-pandemic, this has impacted the already serious twin housing and homelessness crises.
"Today’s Autumn Statement will provide a huge sigh of relief for the 1.7 million private renters in England relying on housing benefit to help pay their rent," said chief executive of Shelter Polly Neate.
"Homelessness is at a record high and unfreezing housing benefit to cover the bottom third of local rents is an essential lifeline to keep people in their homes," added Neate.
"However, pushing this to April 2024 will leave many families facing an uncertain winter with the threat of homelessness and spending their Christmas in grotty one-room temporary accommodation looming large."
"Families [are] facing an uncertain winter with the threat of homelessness and spending their Christmas in grotty one-room temporary accommodation"
Average asking rents in London are up 28 per cent since 2019, according to Rightmove, with a home that would have cost £2,008 a month now asking for £2,567.
The current London housing benefits caps are around £260 per week for a one-bed property, £302 for a two-bed and £354 for a three-bed.
Unfreezing the Local Housing Allowance rate would allow people to claim support for their current local rent prices.
The 30th percentile is calculated by taking 12 months of lettings information from the previous year, then basing the rate on what the cheapest 30 out of 100 homes would cost to rent.
In practice, this should make the lowest 30 per cent of the local market available to tenants who receive Local Housing Allowance.
"Our work with homelessness charity Crisis shows that freezing the local housing allowance over time means fewer homes are available to rent for those in receipt of housing benefit forcing households to stay where they are or become at risk of homelessness," said executive director of Zoopla Richard Donnell.
"Resetting the local housing allowance in line with the market is an important first step"
"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," he added.
"Longer term its vital that national and local government work to boost housing supply including homes available for rent to all types of household."
Zoopla calculated that several areas of London need the rent for a two-bedroom home in the lowest 30th percentile of the market reset by over 33 per cent.
In Southwark, where a two-bedroom home in the 30th percentile costs £1,819 a month in rent, the Local Housing Allowance has been frozen at £1,346 for years.
If the cap was reset by 35 per cent to bring it in line with the current market, a household in Southwark could claim £473 more in housing each month.
In Lambeth, renters in a two bedroom home receiving welfare could get £381 more each month to help pay their private rental costs, and those in Wansworth could get £349.
"We need more action from the government... to make sure that Local Housing Allowance keeps up with rents, rather than being frozen yet again.”
While the unfreezing is welcome to those relying on benefits to pay their rent, there are many more people who will miss out said Generation Rent.
“Not all renters will get the support we need from this announcement — families caught by the benefit cap won’t get an extra penny — and tenants who need to find a new place to live will still struggle to afford current market rents, which have risen much faster than even the new LHA rates," said the campaign group.
“That means that if your landlord evicts you, you could still face having to go to the local council for homelessness support.
“We need more action from the government to reduce the number of evictions, build more homes in places people want to live, and to make sure that Local Housing Allowance keeps up with rents, rather than being frozen yet again.”
London politician Sem Moema previously warned that inflation has squeezed Local Housing Allowance rates so much so that only 2.3 per cent of rental properties in the capital are currently fully covered by it.
As of June 2023, only one in 20 private rental properties newly listed on Zoopla were affordable for people on housing benefits or receiving universal credit.
Almost 60,000 London renters are at risk of homelessness by 2030 unless the Government increases housing support, according to a new report from London Councils.
The analysis showed that one in seven people renting in London are reliant on Local Housing Allowance to afford their rent.
One in 50 Londoners is now homeless, with 170,000 people – 83,500 of them children – having to be housed in temporary accommodation.
Local councils across London are overspending their budgets by £600 million in total in order to accommodate them.
While the thaw in benefits freezes is welcome, local government collective London Councils warned that it would not be enough to balance the books.
“Boroughs will continue to face massive budget pressures. Many are struggling to balance their budgets and the Autumn Statement leaves them teetering on the edge," said Cllr Clair Holland, acting chair of London Councils.
“London’s homelessness emergency is a key concern. After years of campaigning for an increase in Local Housing Allowance, we welcome the decision to end the freeze. Boosting LHA is essential for helping low-income Londoners pay their rent and avoid homelessness. This is good news for London renters and for boroughs’ hard-pressed homelessness services," Holland added.
“The housing crisis remains a critical risk to town hall budgets. Enormous and growing pressures can also be seen across other vital services, especially adult and children’s social care."
“The housing crisis remains a critical risk to town hall budgets."
Rough sleeping in London is now at its highest since records began, with outreach teams recording more than 4,000 people sleeping on the capital’s streets.
Unfreezing Local Housing Allowance would protect more Londoners from homelessness, keeping families out of temporary accommodation and easing the pressing financial burden on local councils.
It's not just Londoners claiming housing benefits that are at risk from the rental crisis.
Two in five Londoners are just one missed paycheck away from being unable to pay their rent, according to a recent YourGov survey.
Up to 85 per cent of a typical household income could be taken up by London rent, as Londoners face relentless waves of rent hikes during a cost-of-living crisis.
A survey from Generation Rent found one in five UK tenants has faced eviction in the past year due to rent hikes.
One in five London renters report turning to alcohol due to stress over rising rents, while Hamptons reports that 40 per cent of tenants moving in 2023 were leaving London.
