Benefits Cap Puts a Lid on Housing Benefit Rise

Benefits Cap Puts a Lid on Housing Benefit Rise

Though the Chancellor raised the level of housing benefit in the last budget, there are thousands of landlords who will miss out.

Private landlords house 1.6 million tenants who get part or all of their rents covered by housing benefits.

The payments are set according to local housing allowance (LHA) rates, which have been frozen at September 2019 levels since the start of the so called, “pandemic”.

Since then, rents have risen strongly leaving many tenants with big shortfalls between what they need to pay landlords and what they receive from the government, leaving them at risk of arrears.

The Chancellor pledged to raise LHA rates to reflect this growth – which amounts to an average rise of 16 per cent, but in places like London where rent growth has been particularly strong, the increase will be higher, so for example, in Kensington and Chelsea borough it will be worth an extra £82 per week or £4264 per year.

But the crazy thing is that the benefit cap has not been adjusted so landlords and their tenants will not see the benefit in full.

It is like the government is in denial of reality. And the reality is that more people will try to squeeze into homes that are too small for the size of their families. Bad landlords in these expensive areas will likely go along with accommodating them, but the good landlords (who are in the majority) will not be happy with housing people in overcrowded accommodation and more of them will simply stop letting to people who are on benefits because the maths does not add up.

This leads on to more homelessness and an increase in local authorities applying for extra payments from government to patch things up. It is like robbing Peter to pay Paul – and I have commented further on this at this post:

Temporary Accommodation, Homelessness and Private Landlords, End of the Affair – Letting Focus

It is tough on benefit dependent tenants in places like London who are buffeted by fast rising rents and still hit with an unchanged benefit cap.

For landlords generally though, the outlook for 2024-5 still looks bright, though much will depend on the election, with the worst-case scenario being a Labour government who could at worst, follow the insane policies of the SNP/Greens in Scotland where the private rented sector has been clobbered and much contracted by brain dead rent controls and other anti-landlord policies.  

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