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Include Sold/Let Properties? Yes No

Why the local housing allowance freeze needs to go

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Published: 27/09/2018   Last Updated: 19/10/2018  
Tags: Blog

Theresa May’s announcement on 19th September to provide an extra £2 billion to build more social housing is to be welcomed.  

However, this still doesn’t deal with the here and now problem of too few properties being available for those on the housing waiting list.  A key reason for this situation is the 
Local Housing Allowance (LHA) rate was frozen for four years from April 2016.  Meanwhile, in that period of time, rents in the private sector continue to rise year on year.  

Shelter have stated ‘freezing support for private renters reduces the ability to tackle this country’s chronic shortage of affordable homes.’  LHA rates need to be unfrozen to help those on housing benefit access properties in the private sector and not have to use other benefit payments to make up the shortfall in paying their rent.

People might argue ‘well aren’t we just lining the pockets of private landlords?’ The point is that rents in the private sector have been going up regardless of the LHA freeze and those on Housing Benefit are struggling to pay these increasing rents because of the freeze, meaning they are getting into increasing debt trying to pay their rent.

An alternative option might be to create areas where private rent itself is either frozen or rent brakes applied to cap the level rents can be raised, which is what happens in some cities in other parts of Europe.  In this country, for a large part of the twentieth century we used to have a “fair rents” regime where local officials set the maximum amount that could be charged based on a set of criteria.  

It has been argued this impeded investment in the private rented sector and kept buy-to-let landlords out of the market.  Given today’s buy-to-let landlords have already been hit by higher stamp duty costs, tougher lending rules for buy-to-let mortgages and shrinking tax relief, then a rent cap might result in a mass flight from the sector.  

But what if some sort of rent control system was combined with unfreezing the LHA rate, then could we encourage more of these landlords to lease their properties over to a social letting agency, such as Salix Living, who could provide a guaranteed income to them, take the risk from the landlord in terms of asset and tenant management and rent them out at an affordable level to those currently struggling to pay their rent?

With the private rented sector stock overtaking affordable stock in 2011/12, and until all these new homes that keep being promised are built, then we have to keep looking for alternative ways to unlock the private rented sector for affordable living, to enable us to provide homes for people today, not tomorrow.