In their report published last week, the Work and Pensions Select Committee have backed Shelter’s calls to keep housing benefit for private renters covering at least the bottom 30% of every rental market (30th percentile) and to conduct ‘an annual review of rates to ensure they remain appropriate for each area’.
The report examined the increased financial support granted to claimants as a result of the coronavirus (COVID-19) pandemic. One of these measures was the restoration of housing benefit for private renters, or Local Housing Allowance (LHA) rates, back up to covering the bottom 30% of every rental market.
Why the Local Housing Allowance must stay at its current level
Prior to the government’s first national lockdown, the rates had been eroded through years of cuts and freezes so that they bore no resemblance to the 30% of rents in each rental market that they were meant to be covering. In 97% of rental markets in England, the LHA rates did not cover the 30% they were meant to, and in a third of England, they were not even covering 10% of the local market.
The result of such poor coverage across the country meant many families were having to take on huge shortfalls between what they were paying in their rent and their LHA, otherwise they would not be able to find a suitable home. For those on low or no income, these shortfalls are on average £113 per month; a staggering amount to have to make up from other limited means of income.
Often, this would push people towards skipping meals, borrowing money, or selling possessions just to keep up with rent. Ultimately, the inadequacies of the LHA rates were causing people to rack up debt, in many cases leading to rent arrears and homelessness.
With LHA so low, it was almost impossible for low-income households to find anywhere to live. This was leading to growing overcrowding, and an increase in the number of children growing up in temporary accommodation. It was, therefore, a welcome and wholly necessary measure that the LHA rates were restored back up to guarantee that they covered the 30th percentile rents in every local rental market.
Failings in the welfare safety net combine to make it harder to catch those who fall through
The inadequacies of the welfare state must be looked at in full, in order to be understood adequately – and the LHA rates are no exception. The Work and Pensions committee rightly links this together with the five-week wait for Universal Credit (UC) in their report. The five-week wait is the period a claimant must wait to receive their first payment in full after their UC claim is successful. This has been a huge issue for so many low-income households and one which we highlighted, even before the pandemic.
During the pandemic, many more people will have fallen foul of the five-week wait. We know that before the March lockdown the five-week wait was pushing households into debt. Claimants do have the option to take out an advance payment to cover this five weeks, but it is a loan that needs to be paid back.
The payment allows a claimant to receive the first month of their UC in advance, at the point that they begin their claim. However, they must then pay back this advance at high deduction rates, which reduces the amount they receive each month by up to 30%.
The choice between living without income for over a month, or having your income reduced by up to 30% for months can be a devastating choice for many. We documented the impact of this on our service users in this report last year.
Prior to the restoration of the LHA rates to the 30th percentile, many claimants had a shortfall between the rent they had to pay and what they received for their housing costs as explained above. When this coincided with a five-week wait and/or advance payment deductions, the result could be catastrophic. If you had a £113 per month shortfall between your rent and your LHA plus 30% of your UC income deducted due to the repayment of an advance payment, you would struggle.
Show your support today
This is just one of the many reasons that the restoration of LHA rates was so important and continues to be so. We welcome the backing of our position on this by the Work and Pensions Select Committee.
Show your support by joining our urgent call to ensure everyone has a safe home during coronavirus.