‘Affordable and decent housing should be a right for all’

Hywel Williams MP

On the day of the Spring Budget, I led a debate in Parliament focusing on housing benefit, and the mechanism which is used to determine its level locally called the ‘Local Housing Allowance’ (LHA).

LHA is an additional payment to enable tenants in the private rental sector to pay their rent, but it is becoming ever less effective because the level of support is increasingly out of step with real rents in the housing market.

Initially it was pegged to the lower 50% of the market. The government of the day claimed that it would drive down rents as landlords would compete for tenants and accept the lowered rents.

Then it was pegged the bottom 30%, which meant that a family on benefits could rent one of the cheapest 30% of homes in their area and have the full rent covered by housing benefit.

All talk of using it as a market mechanism disappeared. Its function seemed to be to keep benefit claimants in cheap housing.

Since 2012, the LHA rates have been decoupled from the 30%, and have been frozen for subsequent years since.

This has led to a growing gap between actual rents people pay, which have continued to rise, and the amount of housing benefit they receive.

It was therefore long overdue when in March 2020, in response to the pandemic, the Government increased LHA rates back to the lowest 30% of rents.

However, the relief was short lived, as inexplicably, the Government then froze LHA again in November 2020.

This policy was described by the Institute for Fiscal Studies as ‘Arbitrary and unfair, and its consequences will only become more bizarre over time.’

The consequences are now clear. It means that as rents continue to rise, the amount of housing in the private rented sector which is available to those claiming housing benefit is decreasing.

Serious consequences

Last month according to research by the Bevan Foundation, of the 22 local authorities in Wales, only 6 had any properties available at or below LHA rates.

The actual numbers are stunningly bad. During the first two weeks of February, only 32 properties in Wales were available at or below LHA rates,

Just 32 for the entire country, equivalent to just 1.2% of properties advertised on the formal rental market.

The LHA freeze also means that support people get with housing costs is related not to the current level of rents in their area, but to a level that was set nearly three years ago.

As the value of the frozen housing benefit erodes, people must dip even deeper into money used for other essential costs, such as energy and food, with serious consequences for their mental and physical health.

This is likely to be contributing to the shocking statistic that 61% of people in Wales report that their mental health is being negatively affected by their financial position.

The freeze is also perpetuating homelessness and housing insecurity.

Research by Policy in Practice has shown that for every 10% increase of households experiencing a gap between their LHA rate and rent, the proportion of households in temporary accommodation will rise by 1%.

Economic and social damage

Why did the Government re-instate the freeze? Well, they plainly see it as a short-term money saving exercise,

The annual cost of maintaining the LHA level in cash terms was forecast to be £840 million in 2022/23, falling to £345 million by 2025/26.

This alleged ‘saving’ is an illusion given the economic and social damage the decision is causing and the abject misery being visited on people in the most dire of circumstances.

Previous analysis from Crisis, showed that the annual cost of restoring the LHA to the 30^th percentile would be around £1.1 billion.

This would then lift 32,000 people out of poverty and save a further 6,000 people from homelessness.

The reduced pressure on public services would save the UK Government £2.1 billion.

It is obvious that investment in the social security system saves money in the long run and leads to people living happier and healthier lives.

That is why I have called on the UK Government to immediately unfreeze and re-state the LHA to at least the lowest 30% of rents.

The Local Housing Allowance is just one plank of the large-scale reform of the housing market that is needed.

Fair rents

That is why Plaid Cymru, are supporting proposals for a right to adequate housing, and an exploration of what the role a system of fair rents could have in making the private rental market affordable for local people on local incomes.

The devolution of housing benefit has a key role to play in this process, particularly given that related services such as housing, health, local government and social services are already devolved

Had we control over the funding of housing benefit, we could have done things differently in Wales, such as repurposing some of this money into building more social housing.

The Chancellor’s Spring Budget was a missed opportunity to give people who are at the sharp end of the cost of living some much-needed support.

Affordable and decent housing should be a right for everyone.

To make this right a reality, the Government must act by unfreezing the Local Housing Allowance.