Unfreezing Local Housing Allowance would not increase rents

Unfreezing Local Housing Allowance would not increase rents

New analysis by the National Residential Landlords Association suggests that raising Local Housing Allowance rates would not cause private rented sector rents to rise. This comes as the government considers whether to end the current freeze on housing benefit rates from April next year.

Ministers are reviewing the policy of freezing Local Housing Allowance (LHA) rates, which has been in place for several years as a measure to control welfare spending. The freeze has been criticised for reducing affordability for tenants reliant on housing support. However, evidence indicates that unfreezing LHA would not trigger rent inflation.

The National Residential Landlords Association (NRLA) has analysed rental trends alongside LHA adjustments over the past decade and a half. Their findings challenge the assumption that increasing housing benefits necessarily pushes up private rents. This analysis is particularly relevant for landlords and letting agents managing properties let to tenants receiving housing support.

Analysis of LHA and rent trends

Local Housing Allowance was introduced in 2008 to help tenants cover rent costs, initially set to cover the lowest 50% of local rents. In 2011, this was reduced to the lowest 30%. Between 2008/09 and 2015/16, when LHA rates were regularly increased in line with rents, average weekly rents rose by about 2.5% annually.

However, from 2016/17 to 2024/25, during which LHA rates were mostly frozen, average weekly rents increased by 3.4% per year. This suggests that rents rose faster when housing benefit rates were frozen than when they were aligned with market rents.

The previous government realigned LHA to cover the bottom 30% of rents in 2024/25 but immediately froze the rates again from April 2025. This has broken the link between current rent levels and the housing support available to tenants.

The Institute for Fiscal Studies (IFS) estimates that uprating and maintaining LHA to cover the bottom 30% of rents would cost approximately £1.5 billion annually. This is less than the £2.8 billion councils spent on temporary accommodation in 2024/25, suggesting potential savings if LHA rates better matched rental costs.

Context for landlords and letting agents

Approximately one quarter of private renters receive housing support, making the level of LHA a significant factor in rental affordability for many tenants. The freeze on LHA rates has contributed to a situation where fewer than 2% of private rented properties are affordable for those on housing benefit, according to homelessness charity Crisis.

For landlords, the analysis indicates that concerns about rent inflation linked to LHA increases may be overstated. Rental prices are influenced by multiple factors including mortgage costs, tax changes, tenant demand, and regulatory compliance expenses. The NRLA emphasises that freezing LHA restricts access to housing for financially vulnerable tenants and exacerbates homelessness.

Letting agents may see implications for demand and tenant affordability if LHA rates are increased. An unfreezing could improve tenants’ ability to pay rent without necessarily pushing rents higher, potentially reducing arrears and turnover. However, the overall rental market dynamics remain complex.

Practical implications and considerations

Landlords should monitor government announcements regarding the October Budget, which may confirm whether LHA rates will be increased. An uplift in LHA could alter the financial profile of tenants receiving housing support and affect rent collection patterns.

It is advisable for landlords and agents to review tenancy agreements and rent-setting strategies in light of potential changes to housing benefit. Maintaining clear communication with tenants about their housing support status and affordability will be important.

Additionally, landlords should continue to factor in other cost pressures such as energy efficiency regulations and mortgage interest rates when considering rent adjustments. The NRLA analysis suggests that LHA changes alone are unlikely to drive rent inflation, but combined with other factors, the overall impact should be assessed carefully.

Uncertainties and what to watch

The government’s decision on whether to unfreeze LHA rates remains pending. While the NRLA and IFS provide data-driven perspectives, political and fiscal priorities could influence the outcome. Landlords should watch for official guidance following the Budget announcement.

It is also uncertain how local rental markets will respond if LHA rates rise. Regional variations in rental demand and supply could affect the extent to which landlords adjust rents. Monitoring local market conditions will be essential.

Furthermore, any changes to housing benefit policy may be accompanied by broader welfare reforms or housing initiatives, which could impact the private rented sector in ways not yet clear.

What landlords should consider now

• Stay informed about government announcements and official guidance on LHA rates and housing benefit policy.
• Review rent-setting policies to ensure they reflect current market conditions and regulatory requirements.
• Maintain accurate records of tenant housing support status to anticipate changes in affordability and rent payments.
• Engage with tenants receiving housing support to understand their circumstances and provide clear information on rent obligations.
• Consider the wider cost environment, including compliance with safety and energy standards, when planning rent reviews.

Supporting landlords through changing housing benefit policy

The Landlord Association offers resources to help members manage compliance and tenancy arrangements amid evolving housing benefit policies. Our new property management and compliance platform, ORBIT, currently in BETA testing, assists landlords and letting agents in organising property records, rental documentation, and compliance actions relevant to housing support changes.

ORBIT’s tools include document storage for tenancy agreements and housing benefit correspondence, as well as tracking communications with tenants about rent and support. Members can also access up-to-date compliance resources and monitor regulatory developments affecting rent and housing support.

Explore TLA membership to access practical information and support tailored to managing the implications of housing benefit policy changes. Learn more about ORBIT BETA access and how it can help you keep your rental portfolio organised and compliant.

With government decisions pending, being prepared with accurate records and clear tenant communication will help landlords respond effectively to any changes in Local Housing Allowance rates.

Sources: Landlord Today