Housing benefit hikes do not affect private rents, report says as Burnham plots mass council building programme
Private sector rents have not risen when housing support rates have increased, analysis has shown, after Andy Burnham expressed concern about “chasing” rising costs.
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During the Labour leadership campaign, the Prime Minister vowed to oversee the biggest council house building programme since the post-war period.
He warned that “we are forced to chase rents in the private rented sector through the benefits system” while adding attempts to control levels of the local housing allowance (LHA) risk driving homelessness.
Analysis by the National Residential Landlords Association (NRLA) of data in the English housing survey showed that between 2008/09 and 2015/16, when the LHA rate increased in line with rents each year, weekly rents increased by an average of 2.5% annually.
In contrast, between 2016-17 and 2024-25, when the LHA rate was frozen for all but two years, average weekly rents increased by 3.4% a year.
Support for private renters was unfrozen in 2024-25 but the Government opted to freeze rates from April this year.
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A decision on LHA rates next year is expected in the autumn.
Ben Beadle, NRLA chief executive, said: “Our analysis clearly shows that unfreezing housing benefit rates does not lead to an explosion in private sector rents.
“Those making this argument fail to see that rent levels are determined by a wide range of factors including tax and mortgage rates, demand from tenants and the costs of adhering to regulations.
“Freezing housing benefit rates merely locks many of those financially squeezed out of the rental housing altogether and undermines all efforts to tackle the scourge of homelessness.
“It is time for the Government to act and unfreeze housing benefits to reflect housing costs as they actually are, not as they were in the past.”
Research by Crisis and Citizens Advice last year found that less than two in 100 listed private rental properties are available to people in receipt of housing benefit.
This pushed low-income households into debt, poverty and homelessness, with record numbers of families in temporary accommodation, the organisations said.
Bringing down essential household costs was one of four objectives in the Government’s child poverty strategy under Sir Keir Starmer.
The LHA was introduced in 2008 to support claimants to cover the cost of the lowest 50% of rents in an area.
Support was cut to cover the lowest 30% of rents in 2011.
The Resolution Foundation said that rather than regularly updating LHA rates to reflect market conditions, governments since 2016-17 have fallen into a pattern freezing rates in cash terms, with ad hoc resets only every few years.
The think tank added this approach generates “arbitrary inconsistency” in the level of support available in different areas due to variation in rent growth.
Last year the Institute for Fiscal Studies said rents in the UK had increased by 19% since the year to 2023 – the period on which LHA rates are based.
It added: “Failing to update LHA rates since then has resulted in an average loss of almost £1,500 for the more than a million households in receipt of housing benefit and affected by the freeze (in that their rent exceeds current LHA rates).
“Privately renting households are already a particularly poor group, with relative poverty rate of 37%, compared with 21% among the whole population.
“These real cuts to LHA rates therefore have a substantial effect on the living standards of affected households, reducing their disposable income (after deducting housing costs) by 6%. For those in the poorest fifth, this figure is 12%.”
The Government has been approached for comment.