Unfreezing housing benefit rates won't lead to major rent increases suggests new data

New analysis suggests that unfreezing housing benefits would not drive increasing rents.

It comes as ministers consider whether to continue freezing housing benefit rates from April next year.

Successive governments have frozen Local Housing Allowance (LHA) rates in an effort to limit welfare spending. Most recently the Prime Minister, Andy Burnham, argued that the housing benefit system is being “forced to chase rents in the private rented sector”.

As a result of the freeze, the homelessness charity, Crisis, suggests that fewer than 2% of private rented properties are affordable for those in receipt of the benefit.

Now, new analysis by the National Residential Landlords Association (NRLA) suggests there is no clear link between benefit levels and rent increases.

The LHA was introduced in April 2008 with the aim of supporting claimants to cover the cost of the lowest 50% of rents in any given area. In April 2011 it was cut to cover the lowest 30% of rents.

Between 2008/09 and 2015/16 when the LHA rate increased in line with rents each year, weekly rents increased by an average of 2.5% a year.

However, between 2016/17 and 2024/25 when the LHA rate was frozen for all but two years, average weekly rents increased by 3.4% a year.

Having been realigned with the bottom 30% of rents in 2024/25, the previous Government took the decision to freeze the housing support available to renters from April 2025. It ended the link again between rent levels as they are today and the housing support available.

The Institute for Fiscal Studies (IFS) has estimated that it would cost £1.5 billion a year to uprate and maintain the LHA rate to cover the bottom 30% of rents. This represents just over half the £2.8 billion spent by councils on temporary accommodation in 2024/25, a figure which could be significantly offset by uprating housing benefit rates.

Around a quarter of private renters receive housing support to help with their payment of their rent.

The Resolution Foundation has found that restoring housing allowance rates to cover at least the lowest 30 per cent of rents could lift 75,000 children and 125,000 adults out of poverty. Increasing it to cover the lowest 50 per cent of rents would lift 130,000 children and 215,000 adults out of poverty.

Separately, the IFS has warned that a tight fiscal environment is “no excuse for a system that creates uncertainty for renters and unfairness between local areas.”

Ben Beadle, Chief Executive of the National Residential Landlords Association, said:

“Our analysis clearly shows that unfreezing housing benefit rates does not lead to an explosion in private sector rents. The reality is that rent levels are determined by a wide range of factors including tax and mortgage rates, demand from tenants and the costs of adhering to regulations.

“Freezing housing benefit rates merely locks many of those financially squeezed out of rental housing altogether and undermines all efforts to tackle the scourge of homelessness.

“It is time for the Government to act and unfreeze housing benefits to reflect housing costs as they actually are, not as they were in the past.”

-ENDS-

Notes

• The NRLA’s press office can be contacted by emailing [email protected] or by calling 0300 131 6363.
• In his speech to the People’s History Museum in Manchester as part of his Labour leadership campaign, Andy Burham said: “We are forced to chase rents in the private-rented sector through the benefits system. When governments try to control these costs by freezing Local Housing Allowance, it makes families homeless and places unfunded pressures on councils when they have to pay for temporary accommodation. Britain’s housing crisis is having a ruinous impact on its public finances.
• Crisis reports that just under 2% of private rented properties listed in Britain affordable for people on housing benefit.
• According to the English Housing Survey, across England as a whole:
  - Between 2008/09 and 2015/16 when LHA rates were first frozen, average (mean) weekly rents increased from £153 to £184. This represents an increase of £31 or 20.3%. Over this 8-year period it amounts to an average increase in weekly rents of around £3.90 or 2.5% a year.
  - Between 2016/17 and 2024/25 average (mean) weekly rents increased from £192 to £250. This represents an increase of £58 or 30.2%. Over this 9-year period it amounts to an average increase in weekly rents of around £6.40 or 3.4% a year. Within this period, LHA rates were frozen for all but two years in 2020/21 and 2024/25.
• The Institute for Fiscal Studies reports that it would cost around £1.5 billion a year to restore and maintain the LHA rate in like with the 30^th percentile.
• In 2024/25, councils across England spent £2.8 billion on temporary accommodation. See details here.
• According to the English Housing Survey, 24% of private renters receive housing support to help with the payment of their rent.
• The Resolution Foundation has argued that restoring LHA rates to cover at least the cheapest 30% of rents in a local area would lift 75,000 children and 125,000 adults out of poverty across the UK. Restoring it to the median (50th percentile) rent would lift 130,000 children and 215,000 adults out of poverty.