Being in Government is about choices. And, this week, the Chancellor made hers: she decided to completely ignore private renters.
Rachel Reeves’s Budget was historic. Not only because it was the first to be delivered by a woman, but because it signalled a new direction for Britain: the explicit acceptance of the permanent need for a bigger state delivering healthcare and social security.
Unless you’re one of this country’s 1.8 million low-income private renters.
Liz Kendall, the Secretary of State for Work and Pensions, has said that housing benefit and rent support via universal credit are calculated by the Local Housing Allowance (LHA). The LHA for next year will be frozen at this year’s levels. That is in spite of the fact that private rents are rising by 8.4 per cent on average, so much faster than inflation, according to the Office for National Statistics (ONS).
Reeves won’t have taken this decision lightly, but she will have been in no doubt that it would hurt struggling households and could push them, not only into debt, but into homelessness.
One in three private renters relies on state support to pay their rent. If being able to afford rent is your problem, with Reeves as the Chancellor, housing benefit is not a solution because it will now fail to cover average rents in many parts of the country.
Reeves’s Budget was clever in many ways. It addressed the housing crisis in a 360-degree way by tackling landlord and investor speculation with stamp duty increase as well as providing urgent funding for building safety and paving the way for more social housebuilding.
These measures will aid the Chancellor in her mission to grow Britain’s economy. But her failure to address LHA will actively worsen the fortunes of low-income renters who are already struggling to make ends meet.
Freezing LHA means more heartache and hardship. The policy decision might sound like a saving, but it’s a false economy.
Leaving people with a benefits shortfall like this could increase the number of homeless households – including people with children – who require emergency housing, and drive up local councils’ temporary accommodation bills even higher than the whopping national total of £1.7bn it costs per year.
Alex Clegg, an economist at the Resolution Foundation think-tank, says that the freezing of LHA has “a particularly dire effect on the living standards of the poorest privately renting households” across the UK. He warns the pain will be felt more in some places than others.
In some areas, like London, Clegg notes that there is an average shortfall of £60 per week between the support available via LHA and the average cost of rent against which the benefit is benchmarked. In Manchester, it’s £24 per week and, on average, it’s £14 per week elsewhere.
These gaps will continue to grow as long as the LHA remains frozen. For that reason, Clegg says “the Government should commit to housing support that rises in line with rents”.
Britain’s new Government had an opportunity to make social security fairer in their first Budget. Making sure that low-income households have enough money to pay rent would have been the most sensible place to start.
They missed that opportunity, and, with it, they missed a chance to lift struggling families out of poverty. Long term, this would save the state money because it would reduce the strain on other services such as the NHS and emergency housing.
Labour’s Renters’ Rights Bill won’t come in to force and deliver protections against eviction until next year, and it will take years to build the affordable social homes they have promised. In the meantime, low-income renters would be forgiven for feeling like they’ve been abandoned.
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