What the Local Housing Allowance increase means

From the beginning of April 2024, Local Housing Allowance (LHA) rates rose after four years of being frozen. We thought that this would be a good time to explain what LHA is and what the un-freezing means.

LHA determines how much money people are entitled to receive in housing benefits. They are meant to be set to a level that allows people to afford the bottom 30% of properties on the rental market in the area they live. Within LHA, the amount of money that people can get depends on factors like their age and whether they have a disability.

The freeze

Until this week, LHA had been held at the same level since April 2020.

The problem was that over the last four years, rents have gone up significantly. This has meant that benefits based on levels from 2020 have not been sufficient to let people reliant on them afford to rent almost anywhere.

Combined with the wider cost-of-living crisis, the freeze made life extremely hard for many people and contributed towards increased homelessness, as Alma Economics found in a report published in September 2023.

Glass Door is part of the #CoverTheCost coalition, which has brought together a wide range of organisations to campaign against the LHA freeze. In November 2023, years of this campaigning helped to convince Chancellor Jeremy Hunt to announce an end to the freeze in his Autumn Statement.

How much of a difference will the new rates make?

Increased LHA rates will make a positive difference to many people around the country, and we welcome them. However, it is worth noting that the increase is not a solution to the housing crisis.

For a start, rents will most likely continue to rise from where they are now, but there has been no commitment that LHA will be adjusted to match this. Unless the government up-rates LHA again next year, we could end up in a similar situation to where we were before the 2023 Autumn Statement. Before long, very few rental properties will be affordable to people receiving housing benefits.

There is also the problem of the Benefit Cap, which limits the total amount of benefits that people can receive. The cap is slightly higher for London than the rest of the country, but Glass Door Homeless Charity’s Co-Head of Casework, Neil Parkinson, had the following to say:

The higher rate of the Benefit Cap for London doesn’t sufficiently reflect the higher rents here: in reality only a small proportion of our guests (who have an exemption from the Benefit Cap) can ever receive the full LHA rate as (even before this increase) it already takes their total benefits over the Benefit Cap, which is not being raised. This increase will unfortunately not help the majority of our guests without action also being taken on the Benefit Cap.

So unfortunately, a lot of people who are struggling to afford their accommodation or build a route out of homelessness in London, where the unaffordability of housing is at its most severe, will likely not be able to receive the full increase indicated by the new LHA rates.

Changes to automatically up-rate LHA and lift the Benefit Cap would absolutely make an important difference. But beyond this, for a real solution, the root causes of the housing crisis must be addressed, which will require rents to be brought down and an increase in the supply of social housing.