Is it time to unfreeze Local Housing Allowance rates to end homelessness?

In one of the rare housing giveaways, he gave £54m to help tackle homelessness. But while this was welcomed, many argue that addressing the LHA freeze is more crucial than short-term cash injections, and that the government needs to pay attention to the long-term effects of the freeze.

According to Crisis, lifting LHA rates would also have the potential to help 35,000 children out of poverty over the next three years.

“We know that homelessness can be ended, but without measures such as these prioritised in government’s spending decisions, it will only continue to rise”

In its Cover the Cost report, Crisis estimates that the cost to the government of restoring LHA rates would be £3.3bn over three years, but this is offset by the net savings of £2.1bn as a result of a lower need for homelessness services, health services and spending on the criminal justice system. With other benefits such as less demand for temporary accommodation, Crisis estimates that wider benefits could total £5.5bn.

However, persuading the Treasury of this is clearly tricky.

Melanie Rees, head of policy and external affairs at the CIH, says: “[The LHA] has got seriously out of kilter with rents. It was supposed to cover the lowest 30%, and we have been saying, can government restore that link? It is about convincing the Treasury that needs to happen because there are clear links to homelessness – both preventing it from happening and helping those who are already homeless.”

“Every day through our work we hear from people whose housing benefit simply doesn’t cover the cost of their rent, leaving them under immense financial pressure and at genuine risk of homelessness”

One local government expert believes that the LHA costs cannot be looked at in isolation. “The problem is that the LHA freeze leads to funds being used inefficiently, with local authorities diverting resources to cover the cost of the freeze. You build a layer of bureaucracy unnecessarily and push people into homelessness, which adds to the costs to the Treasury and is daft,” they say.

Responding to the Spending Round, Jon Sparkes, chief executive of Crisis, notes the extra costs incurred as a result of the freeze.

“Every day through our work we hear from people whose housing benefit simply doesn’t cover the cost of their rent, leaving them under immense financial pressure and at genuine risk of homelessness,” he says.

“We know that homelessness can be ended, but without measures such as these prioritised in government’s spending decisions, it will only continue to rise.”

Tony Stacey, chief executive of South Yorkshire Housing Association, says he is disappointed in the government’s lack of action last week. “It’s fine to have bits in there for homelessness and rough sleeping, but it’s just a sticking plaster,” he says.

“When the bath you’re trying to top up is so leaky, the level of services overall is going to go down,” he adds.

The LHA freeze has had an impact across every region of the UK. However, the size of the deficit built up in individual regions varies widely. Unsurprisingly, areas such as the South East, where rents have risen most steeply, are worst hit. Crisis’ report states that in York, the gap is approximately £53.40 a month. In London it is four times more, at £227.80.

“It’s fine to have bits in there for homelessness and rough sleeping, but it’s just a sticking plaster”

The number of properties in any region that are affordable for families on housing benefit also varies widely. In Caerphilly in Wales, 29% of privately rented two-bedroom properties are affordable for a small family, whereas only 7% of homes in Bath are affordable, and no homes in central London are affordable.

According to the local government expert we speak to, the LHA has a number of flaws that the Department for Work and Pensions and the Treasury need to address. These include a lack of detailed data on realistic rental rates in individual areas, which has led to artificially low rent estimates.

The expert also says: “The Treasury’s main concern is that if you lift the LHA you would lift rents. The counter argument would be that cutting the LHA hasn’t led to any rents going down.”

As the arguments for raising the LHA continue to grow, the pressure from the sector will be on the government to change course sooner rather than later. And that voice will only get louder and louder.