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”.

Is this the most depressing, mind-boggling, ridiculous justification ever from government?

The government announced in late 2015 that the rents that specialist supported housing services could charge and be paid for through housing benefit / Universal Credit would, from April 2019, be capped at Local Housing Allowance (LHA) rates. This move has been widely opposed because it is likely that many services would become financially unviable.

The government is currently consulting on how services can be protected and is considering a ring fenced pot to make up any shortfall. Yesterday I was at the consultation event in London looking at this very issue. I can’t say that the mood was particularly upbeat!

The problem with using LHA is that it has not kept up with the reality of local housing markets and, what is more, George Osborne froze the rate that LHA will be paid for the foreseeable future.

A small illustration: in Brighton and Hove the average one bedroom flat is currently £971 per month. LHA in the city is £612 per month.

There is an absurdity to link the payments for supported and sheltered housing tenants to LHA rates. LHA is meant to cover housing costs.  But it costs roughly the same to provide these services where ever you are in the country. As it happens, Brighton and Hove has a higher than average LHA rate, far higher than an area in the north of England yet it costs the same, for example, to maintain a lift in the north of England as it does in the south.

The LHA is a lousy guide to actual costs.

LHA was originally introduced to set the amount of housing benefit that would be paid to claimants who rented in the private rented sector. The figure was supposed to equate to the 30th centile of rents for properties in a locality.

But why is the government determined to base rents for specialist supported housing scheme on the LHA? This week we got an insight into its thinking, and I have to say it is most mind-boggling, ridiculous justifications I think I have ever heard. That view appears to be shared by the person who gave the justification.

At the National Housing Federation’s finance conference which took place in Liverpool last week, the manager for housing policy at the Department for Work and Pensions, Darrell Smith, said in response to a question as to why LHA rates are being used for setting benefit levels for supported housing, he said: “The one advantage of (LHA rates) is that they are already there, so it doesn’t cost government anything to set it up. I know that isn’t a great answer, but that’s all I have got.”

If that is the way that government is developing its strategy for those very services that support the most vulnerable members of our society, what hope is there?