Low-Income Renters

Housing benefit plays an important role in enabling low-income renters to afford their rent. For example, the English Housing Survey shows the average social rented household’s housing costs were reduced from 37% to 28% of their income by housing benefit.

The total number of housing benefit claimants has fallen in recent years (chart below) and government expenditure on housing benefit has also fallen. Despite these falls, there are still many local markets where housing benefit claimants make up a large proportion of the private rented sector leaving them exposed to changes benefits. These changes include the household benefit cap and a freeze to Local Housing Allowance (LHA) which are causing issues for many low-income households, particularly in the private rented sector. Given the wider affordability picture, it is likely the fall in housing benefit claimants results from reduced welfare spending rather than reducing demand.

LHA was originally intended to be equivalent to the 30th percentile of private rents across the Broad Rental Market Area (BRMA) for a given property type. However, the freeze in LHA since 2016 has resulted a growing gap between LHA and 30th percentile rents. The chart below shows that LHA only covers 95% or more of rent in just 31 of 152 of BRMAs. It also shows the gap is bigger in BRMAs with higher rents. Households must make up the difference from other income, including other benefits. However, this is made more difficult for those subject to the cap in total household benefit. It is also important to consider the impact on different household types including single parents and young people.