Private rented housing is “out of reach” for under 35s, says the Chartered Institute of Housing

The Chartered Institute of Housing (CIH) recently carried out research into the gap between rents in the private rented sector and what Local Housing Allowance (LHA) will pay.

LHA is based on the 30th centile of the range rents charged in the private rented sector. Except it isn’t. That was how it was supposed to be (having previously been reduced from there 50th centile). In fact, the level of payment has been frozen for three years and will be frozen until 2019/20. LHA no longer reflects in any way the reality of rents in a locality.

In Brighton and Hove the rates are £82.66 for a room in a shared house, £153.02 for a one bed flat, £192.48 for a two bed property. The average one bed flat in Brighton and Hove is now £971 per month compared to LHA of £612.08 for the same period.

In Eastbourne the rates are £67.00, £116.53 and £151.50, and in Hastings £69.77, £92.06 and £120.29. (There are higher rates for 3 and 4 properties).

It is worse for you if you are under 35 where you are restricted to claiming LHA for just a room in a shared house.

And if you think it is bad for under 35s, it is EVEN worse for those under 21 for whom the rate is zero (unless you are ‘lucky’ enough to qualify for one of several exemptions – merely being a rough sleeper is not enough).

So what has the CIH found? It has found that the gap between LHA and rents has widened to the point where private rented housing is “out of reach” for under 35s.

A couple of weeks ago I wrote how the senior civil servant responsible for housing policy at the Department for Work and Pensions, Darrell Smith, said that the government is now going to use LHA rates to set new, lower rents for specialist supported housing. Why? Because it is such a good barometer for the market? No. He said: “The one advantage of (LHA rates) is that they are already there, so it doesn’t cost the government anything to set it up. I know”, he continued, “that isn’t a great answer but that’s all I have got”.

Rent caps are the only way that the private rented sector will once again become affordable

The Chartered Institute of Housing (CIH) has carried out research into Local Housing Allowance (LHA) and affordability. It has concluded that LHA, set at 30% (more accurately the 30th centile) of the market, is set too low in some areas. THE CIH says that in some areas tenants are only able to afford accommodation in the bottom 5% to 10% of the local market, not the lower 30% as it was designed to do.

Previously LHA was been set at 50% of the market.

Sometimes I wonder about the value of research, not because it doesn’t add value, but it tells you the bleeding obvious. In an area like Brighton and Hove, LHA enables claimants to afford accommodation in the cheapest 1% of accommodation in the private rented sector. In Brighton and Hove a one bedroom flat, for example, costs on average £970 per month. LHA will pay £612 for the same period.

The CIH is not only correct on their analysis but also their conclusion that the situation is likely to get worse as the government has announced that LHA rates are to be frozen for four years in an attempt to reduced the housing benefit bill.

The government might achieve that impact but it will mean people are driven further into poverty with fewer and fewer property being available for people on the lowest incomes, and will lead inevitably to an increase in homelessness.

The government must either introduce rent caps so that LHA has some bearing on rents in a locality, or the cap on LHA must go.  The latter would see rents spiralling further out of control.  It has to be rent caps.

What happens when people just can’t afford to live anywhere?

Research by the Chartered Institute of Housing (CIH) into Local Housing Allowance (LHA) rates has concluded that rates are being set too low in some areas, severely restricting the amount of housing available to benefit claimants.

LHA rates are supposed to reflect the lowest 30% of the private rented sector homes in the area. But the CIH research shows that in some areas tenants are only able to afford the bottom 10% of the local market.

Please tell me something I didn’t know! And it will only get worse given the government as frozen LHA levels for the next four years.

At its Welsh conference this week, the CIH said that in Newport the LHA shared room rate is £29 per week below the bottom 30th percentile of the market. In Methyr Cynon it is £30 per week too low for family-sized homes.

In Brighton and Hove, LHA for a one bed flat is £612 per month. The average one bed flat is around £970 per month.  Less than 1% of one bed flats in the private rented sector in the city are now within LHA levels.

What happens when people just can’t afford to live anywhere?

The economic consequences of current housing policy

Last Thursday (23rd April) I gave a presentation to the Hove Civic Society on the supply of affordable housing to buy and to rent in Brighton and Hove.  I have prepared four bite size summaries of my presentation.  On Sunday I posted about The scale of the problem and yesterday about The need to build build build.

Today, the economic consequences of current housing policy

There are tens of billions of public subsidy going into housing, mainly into paying for housing benefit, the Right to Buy, and Help to Buy.

The majority of public subsidy used to go in investment into bricks and mortar, thereby allowing social rents to be changed while an asset was created for current and future generations.

That changed in the early 1990’s when councils were no longer allowed to develop and housing associations had to rely increasingly on private finance.  The subsidy moved from investment to ongoing revenue support, year in year out.

It was an economically illiterate decision which was not reversed by the later Labour government and accelerated by the Coalition government.  We are paying the price today.

In 1991/92, the housing benefit bill was £8.6 billion.  By 2012/13 it was £21.5 billion and will increase to over £25 billion unless there is great vision and incredible courage by our politicians.

It will require borrowing, something most politicians will not consider. A survey, carried out by Ipsos MORI for the Chartered Institute of Housing (CIH), published in April, found that 54% of adults in England would support government borrowing to fund more affordable homes for people to buy or rent.  Only a fifth (21%) were opposed.

Who will house the young?

Yesterday I asked the question of future governments: who will house, not just the poor, but people on average incomes. I concluded that it certainly won’t be the large housing associations.

For the last couple of decades there has been an obsession about home ownership. This might have been a viable policy when prices were affordable and supply plentiful. Last week, the UK Housing Review, published by the Chartered Institute of Housing, reported on the rising inequality between young and older people when it comes to home ownership.

It found levels of home ownership has dropped for young people: two thirds of 25 to 34-year-olds were home owners in 1991 compared to slightly more than just a third in 2013/14.

With spiralling rents, an increase in zero hours contracts, and crippling student loan debt, I’m glad I am not a young person just starting out on my housing journey.

The question remains: who will house the poor, the average earners, the young?