New analysis from the leading youth homelessness charity Centrepoint has found that the Local Housing Allowance (LHA) covers the full cost of privately renting for young Universal Credit claimants in only 1 in 8 (12 per cent) local authorities across England.
In London, the LHA failed to cover the full cost of the cheapest 25 per cent private sector room rent across 23 local authority areas. Young people looking to rent in these areas could be facing a £75 shortfall every month.
The charity looked at how the lowest form of the LHA rate – the Shared Accommodation Rate, set by the Valuation Office Agency and paid by the Department for Work and Pensions – compares to the cheapest 25 per cent of rooms (in a shared house) in the private rented sector across England.
In theory, the LHA rate should enable a young person claiming Universal Credit to afford the cheapest 30 per cent of rooms (in a shared house) in the private rented sector. However, Centrepoint’s analysis has found that current rates only cover the full cost of renting the cheapest 25 per cent of private sector room rent in 27 out of 231 local authority areas.
The average shortfall between the LHA rate and the accessible cheapest 25 per cent of the rental market for young people across England – where the LHA rate is less than the cheapest rental costs – is nearly £70 per month. However, in some local authorities the shortfall is hundreds of pounds. In one local authority area, a young person could be forced to make up over £400 to cover the rent.
This analysis comes as the cost of renting rose by 2 per cent in 2021, as reported by the ONS. Centrepoint has warned that this increase coupled with the current frozen LHA rates could put young people at risk of becoming homeless.
In response to the COVID-19 pandemic in 2020, LHA rates were meant to be restored to the cheapest 30th percentile. However, even then, just 16 per cent of local authorities’ LHA rates covered the true cost of renting, and have since been refrozen.