Local Housing Allowance freeze: joint letter to UK Government

To: Mel Stride, Secretary of State for Work and Pensions, UK Government
From: Paul McLennan, Minister for Housing, Scottish Government and Maureen Chalmers, COSLA Community Wellbeing spokesperson

We are writing in advance of the budget to express our deep concern about the ongoing freeze to the rates of Local Housing Allowance (LHA) and to request that LHA rates are reviewed and adjusted to reflect current housing market conditions. LHA rates no longer provide genuine support to those who need it most and the freeze is making life very difficult for private sector tenants in Scotland.

The UK Government’s decision to freeze LHA rates at 2020 levels for three years running has cut support to private sector renters to the point that some areas are simply unaffordable for those in receipt of housing benefit/universal credit in Scotland. Freezing LHA rates is likely to increase poverty and inequality; it hinders the efforts of the Scottish Government and local authorities in our core missions to tackle poverty and prevent homelessness.  

The United Nations’ poverty envoy said, ahead of his visit to the country this week, that poverty levels in the UK are “simply not acceptable” and the UK government is violating international law. He is urging ministers to increase welfare spending.

In Scotland, since last October, intra-tenancy rents have been subject to a cap, as introduced by the emergency Cost of Living (Tenant Protection) (Scotland) Act 2022, which aims to stabilise rents to help existing tenants stay in their homes. The rent cap is currently set at 3% for the private rented sector and is expected to remain in place until March 2024 at the latest.

However, the cap does not apply to new rents which are continuing to rise in many areas. Zoopla published a report titled 'Rents for new lets rise 10.3% over the last year' on 3rd October 2023, covering changes in average rents for new tenancies over the latest year to September 2023. This report is based on newly advertised rental data and does not include trends in rents for existing tenancies, and does not therefore cover trends in rents for the whole private rented sector in Scotland. 

The report finds that Scotland has the highest level of rental inflation in the UK (12.8% in the last year to September 2023), similar to the corresponding increases in some other regions in England and Wales, with increases of 10% and above in the West Midlands (10.1%), Wales (10.2%), the North West (11.3%) and London (11.5%).

A recent analysis by Crisis and property website Zoopla has found that, across Scotland, just 7% of one to three-bedroom private rented sector properties listed in 2022 to 2023 were affordable to people who need housing benefit to pay their rent. An Institute of Fiscal Studies analysis found that in the first quarter of 2023 just 5% of private rental properties in the UK were affordable for housing benefit recipients.

The gap between the cost of renting and the LHA rate is too wide and is growing, a point echoed by the Joseph Rowntree Foundation 'The UK Government should Raise the local housing allowance to a more realistic reflection of housing costs'. 

The cost of living crisis continues to be extremely challenging for many people. It is essential that steps are taken to protect household incomes and ensure that people are able to meet their household costs. Keeping LHA rates frozen at 2020 levels for yet another year will pose a significant risk to wellbeing for people across the UK. As private rented housing becomes increasingly less accessible to low income households, it substantially increases their risk of homelessness, which is unacceptable.

The impact of the freeze is also affecting our ability to help support displaced people from Ukraine settle well in Scotland. The Scottish Government and local authorities are working in partnership to overcome the barriers to displaced people accessing private rented housing but the LHA rate freeze means that this is simply not an option for many Ukrainian people who want to make Scotland their home.

With budgets becoming ever tighter, we urge you to restore LHA rates to at least the 30th percentile. This will prevent many people having to make difficult choices between paying their rent, feeding their family or heating their home.

We sincerely hope there will be some more support for renters with low incomes in the upcoming budget.

We would welcome a discussion on these matters with you and look forward to an urgent reply.

Related information

• Rents for new lets rise 10.3% over the last year - Zoopla

• Locked Out: Local Housing Allowance & affordability in the private rented sector in Scotland | Crisis | Together we will end homelessness

• Housing quality and affordability for lower-income households | Institute for Fiscal Studies 

• Poverty in Scotland 2023 | JRF