Analysis by the Chartered Institute of Housing (CIH) for the 2023 UK Housing Review highlights the impact of the government’s decision not to raise local housing allowances (LHA) to reflect the true cost of renting.

LHA rates are limited by legislation and based on private market rents paid by tenants in a broad rental market area (BRMA). They were restored to the 30th percentile rent (to cover the cheapest third of rents) in April 2020 in response to the pandemic (after eight years of failing to fully uprate in line with local rents) but have since been frozen.

CIH analysis of the Valuation Office Agency list of rents shows that in April 2022 (the latest data available), the LHA shared rate covered just ten per cent of rents or less in seven out of every ten local markets (BRMAs).

For every category of dwelling, at least one in five BRMAs had fewer than 20 per cent of homes available within the LHA rate. The rapid erosion in the shared accommodation rate is particularly alarming, with nearly nine in every ten BRMAs having fewer than 20 per cent of homes available, and in one in every ten there are no shared properties at all within the LHA rate.

The Review shows that limitations on levels of eligible rent have become a major structural problem, undermining the logic that rent payments should not result in household incomes falling below an agreed minimum. In a large number of cases they now do, affecting the incomes of existing tenants and making the private rented sector even less accessible to benefit recipients.

CIH is calling on government to restore LHA rates to the full 30th percentile rent and ensure this is maintained in future years.