The government has restored Local Housing Allowance (LHA) to cover the cheapest 30% (30th percentile) of market rents to the level it was at in 2011. This has upped the Housing Element of Universal Credit for a two bedroom property in Witney by £76.13 per month to £912.50, and by £100 per month for a three bedroom property to £1100. This is a very welcome adjustment to the housing allowance.
This is good news for some current and new private renters as it means less of a gap between the actual rent and the amount they need to pay. West Oxfordshire District Council have advised that the new LHA changes have been applied and will be dated back to 1 April 2020.
As long as local rents do not rise in the short term, this will mean that proportionally more properties will be affordable for people receiving the benefit. In April 2020, 9 out of 35 (i.e. 26% of) three bedroom properties advertised on Zoopla were affordable under the new LHA rate. In comparison, 27 out of 40 (i.e. two thirds of) two bedroom properties were now affordable under the new LHA rate, which is very good news.
However, with the severe economic impact of Coronavirus, there are now large numbers of people needing to claim housing benefit for the first time. Average rents for three bedroom properties locally are significantly higher than the 30th percentile. Many people who need to claim benefits because they’ve lost their job or income are paying much higher rents than housing benefit can cover.
In Witney, the average rent for a two bedroom property is £900 a month, which is covered by the new LHA rate. However, the average rent for a three bedroom property is £1200, which is £100 per month more than the new LHA rate. For a single parent with two children, this £100 shortfall per month will significantly eat into the £840 monthly Universal Credit payment for the rest of their living costs.
It is likely that this recent restoration, to levels required before this health emergency, will prove inadequate for large numbers of people in these extraordinarily difficult times. Many of the people now registering for Universal Credit are living in homes they could afford to rent in normal circumstances, but now will not be able to when relying on benefits. Many face coming out of this crisis in large amounts of debt and at risk of eviction once the lockdown is over.
A more robust solution for renters would be for the government to lift housing benefit further, to cover the average cost of renting a home in every area (taking it to the 50th percentile of rents) to help more people through this crisis.
Written by Ruth Stravis, Citizens Advice West Oxfordshire Researcher