Local Housing Allowance freeze: letter to UK Government

To:  Secretary of State for Work and Pensions, Rt Hon Mel Stride MP
From:  Minister for Housing, Paul McLennan MSP

I am writing to urge you to reconsider the ongoing freeze to the rates of Local Housing Allowance (LHA).

The 2023-24 LHA rates for Scotland, which were published on 31 January, show that rates have been frozen for the third year running. LHA rates were last set on 31 March 2020 and have not been raised since. This is a continuing cash freeze and amounts to three consecutive years of cuts in real terms.

I had hoped to see some support for renters with low incomes in the budget of 17 March, but, despite the current cost of living crisis, this crucial area has been, yet again, overlooked by the UK Government.

In Scotland, since last October, intra-tenancy rents have been subject to a cap. However, the cap does not apply to new rents which are continuing to rise in many areas. Figures from Rent Service Scotland, based predominantly on advertised rental data, show that in the year to end September 2022, which pre-dates the cap, average rents for two-bedroom properties, the most common type of private rented home in Scotland, have increased in 17 out of 18 areas compared with the previous year. Increases in seven of these areas were above the average 12 month UK CPI inflation rate of 7.6%, ranging from 7.7% in Greater Glasgow to 10.3% in South Lanarkshire. Source: Private sector rent statistics Scotland 2010 to 2022 . 

Three successive years of freezing LHA rates is making the private rented sector more unaffordable for some households. Latest Scottish Government analysis estimates that the frozen rate is now below the current 30th percentile for 84% (76 out of 90) of LHA rates, and is below the bottom 10th percentile for 10 of the rates. It is therefore clear the gap between the cost of renting and the LHA rate is too wide and is growing. As private rented housing becomes increasingly less accessible to low income households, it substantially increases their risk of homelessness, which is unacceptable.

Freezing LHA rates is likely to increase poverty and inequality. It works against the efforts of the Scottish Government to tackle poverty and homelessness. Restoring LHA rates to at least the 30th percentile would help us address these problems, and see wider economic benefits too.

A recently published article from the Institute for Fiscal Studies reported, “Compared to uprating them to match local rents, the freeze in LHA rates will reduce support for nearly 1 million households by an average of £50 per month.” About the unfairness of the freeze they go on to say “…[this] results in (increasingly) large and arbitrary variations in entitlements. This means that while some low-income families see almost no change in the share of housing costs they are required to pay, others will have to cover significantly more than they did previously.”

As people face the extremely difficult challenges brought by the cost of living crisis it is essential that steps are taken to protect household incomes and ensure that people are able to meet their essential household costs. Keeping LHA rates frozen at 2020 levels poses a significant risk to wellbeing for people across the UK.

The impact of the freeze is also affecting our ability to help support displaced people from Ukraine settle well in Scotland. We know that many displaced people cannot access private rented housing for a multitude of reasons, and we are doing our best to work with local authorities to overcome existing barriers through initiatives like guarantor schemes. However, the LHA rate freeze means that private rented housing is simply not an option for many Ukrainian people who want to make Scotland their home.

With the already difficult circumstances many households have been faced with over the past year, and with budgets becoming increasingly tighter into this financial year, we urge you to restore LHA rates to the 30th percentile as a minimum. This will prevent many people having to make difficult choices between paying their rent or feeding their families and heating their home.

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

Yours sincerely,
Paul McLennan