Record rent inflation in England will rapidly outstrip the increase in social security for renters announced in the Autumn Statement by Chancellor Jeremy Hunt, leaving affordability for low-income households almost as bad as it is today after just 18 months, Generation Rent warns.
Generation Rent has projected an 8.5% rent inflation from now until late 2025, which would result in rents being 14.2% higher than the baseline used to set the level of support for private renters on Universal Credit or Housing Benefit from April 2024.
The organisation is advocating for a permanent reconnection of Local Housing Allowance (LHA) with actual rents to help those on lower incomes secure tenancies and evade eviction and homelessness risks.
Chancellor Jeremy Hunt announced on November 22nd an increase in LHA to reflect the 30th percentile of local rents, ending a four-year freeze during which average rents outpaced the level of support by 18.3%, set back in 2019.
This freeze has contributed to tenants accruing rent arrears and facing difficulties in securing new tenancies. The latest homelessness figures indicate a rise in households seeking support following the termination of private tenancies, reaching a record high in the year to June 2023.
The Chancellor’s increase in LHA, based on average rents up to September 2023, will be implemented in April 2024, representing a 13.3% increase from the current support levels. However, with no further plans to adjust the support levels in response to rent increases, the support is expected to fall behind again.
Generation Rent has utilised a model incorporating ONS’s new rent index and data on wages, population, and housing stock to predict rent inflation and assess how swiftly the LHA increase will be offset by rising rents.
By the final quarter of 2025, rents are forecasted to be approximately 8.5% higher than current rates and 14.2% above the reference rents determining the new LHA rates from April.
This is expected to almost revert housing affordability to its present precarious state for those depending on benefits, with the annual shortfall for a two-bedroom house in England averaging £1,370. This gap could be even more pronounced for those seeking new tenancies at that time.
Dan Wilson Craw, deputy chief executive of Generation Rent, said: “Until we build enough social homes, millions of people on low incomes will rely on Local Housing Allowance to cover private sector rents. But the past failure of the Government to take responsibility for record rent inflation has resulted in welfare support falling behind, and putting tenants at risk of eviction and homelessness.
“Last month’s announcement of an increase in LHA is sorely needed but will be overtaken quickly by actual rents, and tenants facing painful decisions today will be in the same position in two years’ time. It is past time for the government to relink LHA with local rents permanently so support automatically adjusts to housing costs every year.”
Ian Mulheirn, chair of Generation Rent, said: “Inflation across the economy may have peaked, but for renters the cost of living crisis is far from over. Rents are by far the biggest spending item for millions of people in the private rented sector, but rent growth lags behind inflation in other goods and services. So while the cost of living crisis might be easing for many, the squeeze is set to get worse for renters.”
