GMLC’s Judy Sutton looks at the real-world effects of the freeze on housing benefits since 2020 – and why this must be changed urgently. With additions and context by Kate Bradley.
In June 2023, The Guardian reported on research that showed that a freeze on housing benefit rates since April 2020, combined with several waves of rent rises, have pushed the number of homes on the market that can be paid for through benefits down from 23% in April 2020 to 5%. In Manchester, it is even worse, as Manchester has seen some of the highest rent increases in the country. These increases are tough for those not on benefits, but for those who are – which increasingly includes those in also in low-paid work – it is catastrophic. This article will explore the impact for Manchester residents of the decisions to freeze the Local Housing Allowance and to cut funds for Discretionary Housing Payments, which can help residents who can’t afford their private rents.
Firstly, let’s put this into some context. We have all heard of the ‘cost of living crisis’, but what does this mean for ordinary people’s lives?
According to a Poverty Strategy Commission report published in Autumn 2023, the degree of hardship faced by low-income people is becoming more extreme. There has a been a rise in the proportion of people in poverty experiencing deep poverty (measured as at least 50% below the poverty line). Nearly a third (31%) of those officially in hardship are in deep poverty and struggling to buy sufficient food, energy, and clothes, pay rent and meet other everyday bills. Due to high rents and stagnant or falling wages, 38% of private renters now claim housing benefit to help them afford their rent.
In addition, only 7,528 new social housing homes were built in 2021/22 and 1.1 million people on the waiting list for social housing. According to Manchester Move, the average waiting time in October 2023 for family who need a 2-bedroom social home is nearly 3 years – and that’s for those in ‘Band 2’, which is the band for people who “need to move for urgent reasons”, such as because you are in overcrowded conditions or you are homeless. For families who need 4-bedroom homes, the average wait in Band 2 is over 4 years. Most of these families remain in the private sector paying unaffordable rents, sometimes paying more than triple what they would pay in rent for the same home if it were social housing.
The freeze on Local Housing Allowance
If you are a private renter in receipt of Housing Benefit or Universal Credit, the Local Housing Allowance rates govern the maximum amount of support that you can get as part of your benefits entitlement. These rates have been frozen since April 2020. At the same time, rents have increased by more than a fifth on average, leading to only 5% of new private rental properties on Zoopla being affordable to housing benefit recipients. In some areas this figure is as low as 2.5%.
Private rents in Manchester have grown enormously over the last few years, as anyone who rents privately will tell you. In July 2022, the Manchester Evening News reported the average monthly cost of rented accommodation hitting a record high of more than £1,100, with rent prices in the city soaring by 23.4% in the prior 12 months alone. A year later in August 2023, a further rise of 20% was reported year-on-year.
Impact in Manchester
I have done my own basic research for Manchester based on a snapshot at the time of writing. (There are different rates of Local Housing allowance across Greater Manchester for each borough. Find the rates here.) Manchester City Council has two rates that it can pay – one for ‘Central’ and one for ‘Southern’ Manchester.
I have taken the higher of the two LHA rates for the Manchester City Council borough (which should in theory cover more of the rents) and compared this with properties available on Rightmove on 25 October 2023.
Using the search ‘Manchester,’ and discounting properties that were not in Manchester City Council boundaries, I found:
- No room in a shared house for less than or the same as the Local Housing Allowance (£358.89 pcm). The cheapest was £550 and there were only 2 that were less than £600pcm;
- No one-bed properties less than or the same as the Local Housing Allowance (£523.55 pcm). The cheapest was £650pcm with only 4 at that price;
- No two-bed properties less than or the same as the Local Housing Allowance (£648.22 pcm). The cheapest was £750pcm, with only one at that price and the next cheapest being £795pcm;
- No three-bed properties less than or the same as the Local Housing Allowance (£747.93 pcm) The cheapest was £900 pcm, with only 3 properties less than £1100pcm;
- No four-bed properties less than or the same as the Local Housing Allowance (£1096.98pcm) The cheapest were £1300 pcm with 2 at that price and only six less than £1500.
As if this is not shocking enough, most single people under 35 only receive the shared accommodation rate, no matter where they are living. This means that single adults up to the age of 35 are expected to live in house-shares – still without receiving enough benefits to pay for the full price of most rooms in a house.
The lack of properties combined with mortgage interest rate rises (for those landlords with mortgages) means that many private landlords are raising rents, either to make a higher profit or to cover rising costs. This can leave benefit claimants and low-income tenants facing all the consequences of inflation. Some tenants fall into arrears – which can lead to eviction – while others scramble to pay their rent and fall behind on other bills, or are forced to go without basic essentials like food, clothes and heating.
One of the cruellest elements of this system is that people who have fallen into arrears can sometimes be blamed for their own debt if they apply to homeless services or for re-housing. Many private landlords refuse to take tenants who have been in recent arrears, and homeless services sometimes refuse to help by finding tenants ‘intentionally homeless’ for failing to pay their rent.
Discretionary Housing Payments
Discretionary Housing Payments (DHPs) are used to help people with rent shortfalls caused by the Local Housing Allowance rules, the Bedroom Tax, or the Benefit Cap, amongst other ‘exceptional circumstances’. They are paid from a discretionary fund administered by Local Authorities. The circumstances they cover are supposed to be ‘exceptional’, and yet now it is fast becoming the norm for benefits claimants to need them.
Despite an increasing need for the fund, in the 2022/23 financial year the budget for Discretionary Housing Payments across England and Wales was cut from £140 million to £100 million. It was never enough in the first place, and this was a huge cut, implemented precisely at the same time when it needed to be significantly increased to take account of rapidly increasing private rents. Despite this, the government has already announced it will remain at this lower level until at least the end of 2024/25.
Though DHPs are vital for many households, they are no replacement for benefits entitlements. Local Authorities can refuse to pay a DHP at their discretion – for example, if they run out of funds – which means that there is no guarantee that someone who needs it will get a DHP. Relying on DHPs to cover rising rents leaves benefits claimants and low-income people at the whims of Local Authorities. Plus, because DHPs are not paid automatically, people must apply, often online, explaining why they are unable to meet their costs. This adds barriers for those who are digitally excluded, who do not speak English as a first language, or who have some disabilities or impairments.
Greater Manchester residents spoke to OpenDemocracy in September about their difficulties paying the rent due to the LHA freeze and difficulty getting a DHP. One, Mary, said:
“There’s an entire system that needs to be addressed,” she said. “If you’re ill you don’t just address one symptom, you look at all the symptoms and address the underlying issue. Local housing allowance has to reflect what’s going on in the market. So the rents here were pushed up to two years but housing allowance has stayed the same.”
Mary applied to the local council for a DHP. It took five months for the council to award the payment and the process was so difficult that she needed the help of a local disability charity to apply.
On what grounds can the government justify their decision to freeze the Local Housing Allowance and cut Discretionary Housing Payment funds when they are aware that more people are living in increasingly extreme poverty? The situation is at breaking point.
Citizens Advice, in their report The Impact of Freezing Local Housing Allowance published in October 2023, have called for a programme of housing market reform that reduces private tenants’ exposure to unaffordable rent rises. They have also made the following recommendations for immediate reform to ease the pressure on low-income households:
- Restoring the link between LHA and the 30th percentile of local rent costs;
- Reforming the national limits on LHA rates;
- Returning the shared accommodation rate upper age limit to 25;
- Increasing funding for DHPs.
The Law Centre supports these recommendations, and to an extent they echo the demands made by the Law Centre, Shelter and a range of other housing advice providers in Greater Manchester in our ‘crisis point’ letter in January 2023.
These problems are not new: in our manifesto several years ago, we pointed to the problem of housing insecurity and argued for longer-term fixes. If policy-makers had started building and regulating to increase the stock of truly affordable homes when we published the manifesto, we wouldn’t be in this crisis now.
Though we support an increase in benefits to tackle the symptoms of the housing crisis, in the long term, a question remains about whether simply increasing benefits just funnels more money into the hands of private landlords at the public’s expense, causing rental inflation. Instead, governments could look to tackle the causes of the housing crisis by initiating a mass social house-building programme, taking empty buildings and rogue landlords’ properties back into public control, regulating rents and evictions, and properly funding statutory homelessness services and advice/Legal Aid services.