Almost 60,000 Londoners living in the private rented sector are likely to become homeless over the next six years if the government maintains the freeze on Local Housing Allowance (LHA)[1], according to new analysis for London Councils.
The cross-party group has commissioned independent research from Alma Economics that estimates an additional 16,500 to 22,000 London households will become homeless by 2030 unless LHA is raised [2].
London Councils calculates that 22,000 households equates to 58,740 individuals – including 28,000 children [3].
One in seven London private renters are reliant on LHA to meet their housing costs [4].
Alma Economics’ research suggests restoring LHA to cover at least 30% of local market rents would save the public finances in London more than £100m each year. Most of these savings would come from reduced pressure on London boroughs’ homelessness services, but also from lower costs to other parts of the public sector such as the NHS and social care.
Amid worsening homelessness pressures in the capital, London Councils is urging the government to end the freeze on LHA. The policy measure is one of the group’s top priorities in its submission to the government’s upcoming Autumn Statement, which will set out future spending plans.
London accounts for more than half (57%) of England’s total number of homeless households in temporary accommodation. London Councils’ most recent figures show that almost 170,000 Londoners are currently homeless and living in temporary accommodation arranged by their local authority – equivalent to around one in 50 Londoners overall and one in 23 children in the capital.
Boroughs warn that the situation is increasingly unmanageable and that they are set to overspend their homelessness budgets by £90m this year.
Turbulence in the capital’s private rented sector is a critical factor behind the growing numbers of homeless Londoners. Separate research commissioned by London Councils and partners, published in July, revealed a 41% drop in private rental listings in the capital since 2020, with a corresponding 20% increase in listed rental prices.
Only 2.3% of London listings on Rightmove in 2022-23 were affordable to those using the benefit to pay their rent – falling from 18.9% in 2020-21.
Cllr Darren Rodwell, London Councils’ Executive Member for Regeneration, Housing & Planning, said:
"Raising Local Housing Allowance is vital for getting a grip on the homelessness crisis.
“London’s homelessness pressures are already enormous and unsustainable. On current trends, almost 60,000 more London renters are set to become homeless in the coming years.
“London is the epicentre of the national homelessness crisis. The situation is increasingly unmanageable and requires urgent government action. We cannot continue in this disastrous direction.
“Just as the government boosted LHA during the Covid-19 pandemic to prevent a wave of mass homelessness, we need a similar emergency response to the situation today. An increase in LHA will help low-income households pay their rents and avoid homelessness, which can be so devastating to families and bring massive costs to local services.”
More information and a link to the full analysis 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 sector. In 2011 the government reduced the LHA from covering 50% of local market rents to 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.
[2] Alma Economics was commissioned by London Councils to estimate the impact of ending the freeze in LHA rates on public sector finances, specifically, the additional public expenditure required to fulfil the higher LHA rates and financial savings from reduced levels of homelessness.
This replicated much of the methodology applied in Alma Economics’ 2019 report for Crisis, which estimated the social benefits of a similar policy change for the country as whole.
[3] Alma Economics’ analysis is based on household numbers. Using figures for average household size, including the number of children in homeless households, London Councils is able to estimate the number of individuals affected.
[4] The latest available government data shows 393,773 LHA claimants in London. There are around 2,700,000 private renters in the capital.