With a week to go until the Autumn Statement, a cross-party body representing London local government has written to the Chancellor highlighting homelessness in the capital as an “emergency situation” and calling for an end to the freeze on Local Housing Allowance (LHA).
Lead councillors for housing from London Councils’ Labour, Conservative, and Liberal Democrat groups have sent a joint letter arguing that raising LHA – a form of housing benefit that goes to lower-income households living in privately rented accommodation [1] – is the “single fastest way to reverse the deeply concerning rise in homelessness in London and across the country”.
London is the epicentre of the national homelessness crisis. Around 170,000 Londoners – equivalent to one in 50 residents – are homeless and living in temporary accommodation arranged by their local borough.
London Councils recently published independent research showing that a further 60,000 private renters in London are set to become homeless in the coming years unless the government increases LHA rates.
The research found that restoring LHA to cover at least 30% of local market rents would help these private renters avoid homelessness. This would save the public finances in the capital more than £100 million each year – mostly from reduced pressure on boroughs’ homelessness services.
One in seven private renters in London relies on LHA to cover their housing costs. However, separate analysis earlier this year by Savills and LSE London, commissioned by London Councils and partners, found that in 2022 only 2.3% of new private rented sector lettings were affordable under LHA.
Homelessness pressures are a key factor in boroughs’ overall budget instability. London Councils warns that nine in ten boroughs expect to overspend on their budgets this year – estimated at over £400m in total across the capital – and that there is a growing risk of financial and service failures.
An uplift to LHA is one of London Councils’ top priorities for the Autumn Statement. Additional policy asks for tackling homelessness include:
Provide an emergency boost to Homelessness Prevention Grant funding. Local authorities play a vital role in supporting struggling households to avoid homelessness and expect to overspend on their temporary accommodation budgets by £90 million this year. Councils require an emergency funding increase to ensure local services have the resources needed in the face of rising levels of demand for support.
Support councils to buy accommodation sold by private landlords. The government should build on initiatives such as the Local Authority Housing Fund by providing increased capital investment for housing acquisitions, particularly to acquire homes being sold by private landlords as they exit the market.
Increase Discretionary Housing Payments. These payments are used by councils to help residents in financial crisis meet their housing costs. They are an essential homelessness prevention tool, but government funding for Discretionary Housing Payments in 2023-24 has been frozen at 2022-23 levels, despite significantly increasing homelessness pressures.
Bring forward a cross-departmental strategy to reduce homelessness. Tackling homelessness must become a major priority at a national level with government departments working together – in addition to key partners such as local authorities – as effectively as possible.
London Councils’ letter to the Chancellor on Local Housing Allowance can be found here.
ENDS
[1] Local Housing Allowance (LHA) goes to eligible households as part of their housing benefit or Universal Credit payment to cover housing costs if they have a private landlord.
LHA was introduced in 2008 as a way of setting the rent element of housing benefit for tenants living in the private rented sector. In 2011 the government reduced the LHA from covering 50% of local market rents to the bottom 30% (the 30th percentile). Following this, the link between LHA rates and actual rent increases was broken when they were uprated by the Consumer Price Index (CPI) in 2013, prior to a 1% cap on uprating in 2014 and 2015, before a four-year freeze from April 2016.
In response to the Covid-19 pandemic, the government lifted LHA rates in April 2020 to cover the 30th percentile of local market rents. However, since this point LHA rates have once again been frozen – despite a dramatic rise in rents over the same period.