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Prime Minister announces LHA cap will not be applied to social housing

The Prime Minister has announced that the Local Housing Allowance (LHA) cap will not be applied to social housing.

In Prime Minister’s Questions on Wednesday 25th October, the Prime Minister announced that the capping of social rents at the LHA rate will be scrapped:

“[. . .] I can confirm that we will be publishing our response to that consultation on Tuesday 31 October, and it will look at a wide range of issues. We need to ensure that the funding model is right so that all providers of supported housing can access funding effectively. We need to look at issues such as the recent significant increases in service charges, making sure that we are looking at cost control in the sector.​

I can also say today that as part of our response to the review, we will not be applying the local housing allowance cap to supported housing; indeed, we will not be implementing it in the wider social rented sector. The full details will be made available when we publish our response to the consultation.”

The proposal to cap social housing at LHA rates

In the 2015 Autumn Statement, then-Chancellor George Osborne announced that Housing Benefit (and eventually Universal Credit) for social tenants would be capped at the relevant Local Housing Allowance rate.

This proposal provoked significant and widespread concern from many social landlords in Great Britain and Northern Ireland. The Chartered Institute of Housing (NI)’s Welfare Changes forum published research indicating that implementing this policy would lead to significant shortfalls for social tenants across Northern Ireland.

Concerns were also expressed by providers of supported and sheltered housing, who have argued that the costs of providing this housing bear little relation to the local private sector, and flagged the additional costs inherent in sheltered housing for additional care, support and supervision. In Great Britain, the National Housing Federation advised that the planned LHA cap had resulted in 96% of proposed developments of sheltered housing being paused.

LHA rate in the private rented sector

Housing Rights welcomes the cancellation of the LHA cap for the social sector. However, it is now vital that attention is also given to the impact of current LHA rates in the private rented sector, where tenants in receipt of benefits are facing increasing financial hardship, and difficulties in sustaining their tenancies.

The Local Housing Allowance system divides Northern Ireland into 8 areas, and purports to pay for the cheapest 30% of the private rented sector in each of these areas. However, in practice this intent has been eroded in recent years:

Since January 2012, the “Shared Accommodation Rate” of LHA applies to claimants under 35. This means that Housing Benefit claimants under 35, living in the private rented sector, are only entitled to enough Housing Benefit to pay for a single room in a shared house.

  • Since 2013/14, the uprating of LHA has been capped at the CPI measure of inflation (the lowest of the main measures of inflation). This is often lower than typical annual increases in rent.
  • Since 2014/15, the uprating of LHA was capped at a maximum of 1%.
  • From 2015/16, the LHA rate has been frozen for 4 years.

This has meant that, as of May 2016, 80% of the LHA rates in Northern Ireland were falling below the 30th percentile, with the shortfall exceeding £5 per week in several areas. Given further rent rises since this point, it is likely that these shortfalls have increased further.

Private Rented Sector conference

Housing Rights is hosting a conference on the private rented sector on Wednesday 15th November. Topics of discussion will include the role of dispute resolution, and promoting good practice and compliance; in addition to these, Brian Robson from the Joseph Rowntree Foundation will be presenting on the increasing prevalence of poverty in the private rented sector.

Find out more about the conference and book your place.

Tagged In

Benefits, Welfare Reform, Policy

Author

Stephen Orme