The Big Issue has published an article criticising the decision to freeze the LHA rates.

The original article can be seen here, and discusses the recent decision by Chancellor Rachel Reeves to maintain the freeze on Local Housing Allowance (LHA) in her autumn budget has sparked widespread criticism. LHA, which determines the amount of housing benefit low-income renters receive, was originally designed to cover the bottom 30% of private rents in any given area. However, as rents have surged in recent years, the static LHA rates have increasingly fallen short, leaving many renters unable to afford housing in the private rental market.

This decision reverses the previous move by former Chancellor Jeremy Hunt, who had temporarily lifted the LHA freeze last year, costing the government over £1 billion. By freezing the rates again, Reeves has disappointed housing advocates who argue that LHA must be indexed to actual rent levels to prevent deepening poverty and homelessness.

The Scale of the Housing Crisis

The gap between LHA and real rents has left vulnerable tenants at serious risk. Rent inflation continues to outpace LHA, with rents rising 8.4% in the 12 months to September 2024. As a result, homelessness has hit record highs. According to the Joseph Rowntree Foundation (JRF), failure to raise LHA means low-income renters will continue facing rent arrears, eviction threats, and deepening poverty. Research by JRF and Manchester Metropolitan University projects that without LHA adjustments, renters could be £703 poorer annually by the end of the current parliament, with tens of thousands pushed into or further entrenched in poverty.

Calls for Systematic Reform

Housing advocates argue that indexing LHA to local rents is crucial to ensure renters are not priced out of stable housing. Paul Kissack of JRF called for urgent social security changes, noting that without a commitment to align LHA with rent levels, private renters would face further hardship as rents continue to outstrip support levels.

Joanna Elson of Independent Age highlights the impacts on older renters, many of whom have seen rent increases without corresponding LHA adjustments. Ben Twomey of Generation Rent has similarly pointed out that with the freeze in place, the most vulnerable renters are more likely to experience arrears, further tightening the rental market and reducing rental options for those on housing benefits.

Government Spending on Housing

This policy choice occurs within a broader context of government spending priorities. The UK government currently allocates around £30 billion annually to housing benefits, a figure set to rise to £35 billion by 2027/28. This represents a shift in the government’s housing spending balance over recent decades, where funds have increasingly gone to benefits rather than new housing. In the 1970s, for instance, government housing spending primarily funded the construction of new homes, while today, it largely supports rent subsidies.

Lord John Bird, founder of The Big Issue, acknowledged the Labour government’s £500 million pledge to the Affordable Homes Programme to create 5,000 new homes as a positive step but emphasized that far more investment will be necessary. With 1.3 million people waiting for social housing, Bird argued that meaningful progress would require deeper commitments to building affordable housing.

The Path Forward

Housing advocates argue that adjusting LHA to reflect real market rates is essential to support low-income renters and prevent rising homelessness. They call for structural change—building more affordable housing and ensuring LHA keeps pace with rents to reduce the unsustainable reliance on housing benefits. In the long run, creating more social and affordable homes could ease rental demand pressures and provide a foundation for renters to build stable lives.