Do Private Rented Sector Rents Follow LHA Rates
An interesting new report from the Chartered Institute of Housing (CIH) and the British Property Federation (BPF) disputes claims from some in government that past rises in the housing benefit bill were caused by landlords increasing rents in order to take advantage of pre-determined benefit levels.
The report is called “Leading the Market” and it concluded that a more likely explanation was a change in the make-up of claimants as more families are affected by the recession in already expensive to rent in areas such as London and the South East.
The report found the amounts payable for the local housing allowance (LHA) in the private rented sector during an 18 month period following the start of the LHA scheme in 2008 actually fell in 61 percent of areas studied.
This analysis runs counter to comments made by Welfare Reform Minister Lord Freud in evidence to the Work and Pensions Inquiry on the Budget 2010 reforms.
In his submission, he quoted figures that showed housing benefit claimants’ payments went up 3 percent while the Rent Index declined by 5 percent in the period from November 2008 to February 2010.
The CIH and BPF say that whilst Lord Freud’s figures were right, his interpretation ignored other factors such as the changing geographical spread of and type of claimants, which they say were more likely to have contributed to the rising bill.
The CIH said that because LHA does not push up rents, so it logically cannot be used to bring them down again. Therefore the cuts to LHA would end up causing a great deal of hardship to a large number of households and without either the tax payer or households reaping the benefit.
At LettingFocus.com, we have been critical of past studies like this because the data sample was too small, but the data set in this particular study looks robust enough and the findings will add an interesting element to the debate about the impact of cuts in Housing Benefit levels on rents generally.
One thing we would say, though, is that in areas where enough people are on benefits (say 25% of all households and up) then the LHA rate in effect becomes the market rental rate and both influence and feed on each other.
Of course, our view is that there is a great deal more the local authorities could do to ensure that private landlords are not put off letting to people on housing benefits or to the homeless in general.
And if the useful findings in this CIH study deflect attention from the things that councils could and should be doing now, that would be a shame.
Please read the categories on “Housing Benefit” or “Private Rented Sector Access Schemes” over at the Categories or Tags section on the right to read more about what the local authorities could be doing.
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