How do you solve a problem like LHA?
The 'LHA problem' has become wide and far-reaching - and is hitting the vulnerable and those on low incomes the most, says CIH policy and practice officer Faye Greaves.Inside Housing recently revealed that nearly three in four housing associations are set to change their allocations criteria for single under-35s. This is due to plans to cap the help social housing tenants receive with housing costs at the local housing allowance (LHA) rates paid to private tenants.
Prompted by concerns that this group will no longer be able to afford their tenancies once their entitlement is capped at the rate for a room in a shared house, providers are considering how to mitigate the obvious risk to their income streams. Some options being considered include offering shorter tenancies, blocking access to certain types of properties and ramping up affordability assessments.
I recently attended a roundtable event in the West Midlands where providers shared ideas and thoughts on whether or not to review allocation policies and what a changed policy might look like in light of the cap. It was a positive and productive discussion with the majority eager to find a way to continue housing those affected. So, while there doesn’t currently appear to be a mass exclusion of under-35s, the restrictions, barriers and limitations on the horizon are a real worry. Unless the social sector seriously considers shared living schemes as part of its offer, where will the young people affected live - the private rented sector?
Our recent analysis of the widening gap between LHA rates and private sector rents confirms that since 2012, rates have failed to keep pace with rent increases. Since it was first introduced in 2008, LHA has been subjected to reform and successive caps – the latest saw rates frozen at the 2015/16 figure for four years from April 2016. What this effectively means is that people in receipt of LHA are being limited to a declining percentage of the private rent sector (PRS) - in a number of parts of the UK the rate of LHA now paid means that people can only afford to rent in the bottom five or 10 per cent of the market.
As the shortfall increases between LHA rates and actual market rents, it will become increasingly difficult for people on low incomes to find or sustain a PRS tenancy, inevitably placing higher demand on an already limited stock of social rented housing. We already know that loss of a private tenancy accounts for 30 per cent of cases where English councils accepted a rehousing duty to homeless households. But, with the pending LHA cap to social sector rents too, how will councils rehouse all of those they accept a duty towards? So far, LHA reforms are affecting access to both the private and social rented sectors for people on lower incomes.
Then there’s the issue of the cap applying to supported and sheltered accommodation. We know that the government is due to release the findings from an evidence review into supported housing but we also know that the proposed cap and uncertainty around any future funding model has already had an impact on future provision, with developments stalled and thousands of schemes at serious risk of closure.
The year-long delay to implementation and the one per cent rent reduction, and the government’s £70 million additional discretionary housing payment (DHP) funding are acknowledged. However, the concern is that uncertainty remains and DHPs are intended to be both discretionary and short-term in nature so these measures are insufficient to calm sector fears. Without assurances that funding in whatever form will be protected and stay in line with demand and the true cost of provision, the real casualties of this will be vulnerable people who, without this type of provision, face a real threat of homelessness. We already know that supported housing plays a significant role in preventing homelessness - in 2014/15 alone, it helped to prevent or relieve almost 17,000 incidences of homelessness.
The LHA problem has become wide and far-reaching and is hitting the vulnerable and those on low incomes the most. CIH thinks it’s time for government to carefully consider realigning LHA rates for all categories of accommodation but in particular those for under-35s.
Supported housing providers need certainty - and quickly - around future funding if society’s most vulnerable are to be protected. It’s impossible to see how the impact of LHA in its current and pending form won’t seriously undermine any attempt by government to tackle the rising homelessness problem – in fact, I’d say LHA could be a serious contender for making the problem worse.