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LHA cap ‘will make social housing unaffordable’

The local housing allowance (LHA) cap will create a postcode lottery of rent shortfalls across Wales, according to new analysis published by Community Housing Cymru (CHC).

CHC says that the cap that will be imposed by the UK Government from April 2019 on tenancies signed since last year will make social housing unaffordable for those it was intended for and jeopardise future investment in new and existing affordable homes.

The LHA already applies in the private rented sector and in theory should be enough to pay the lowest 30% of rents in any areas. However, under austerity rates were first restricted to 1% a year increases and then frozen from 2016 to 2020. That means that rates remain at 2015/16 levels regardless of what happens to rents and that leaves tenants with rising shortfalls.

The rates in some Welsh Broad Rental Market Areas (BRMAs) are the lowest in the UK and in some cases are lower than existing social rents. In addition, a lower shared accommodation rate (SAR) applies to single people under 35.

CHC analysis of Welsh Government data shows that:

  • LHA rates are seriously misaligned with the reality of the rental market. Over 60% of LHA rates are set below the lowest third of the local market rent
  • Less than 10% of the private rented sector is accessible to people claiming housing benefit in some areas of Wales
  • There is a postcode lottery in Wales, with significant shortfalls between LHA and social housing rents, and tenants hardest hit in the valleys and in rural areas
  • For example, a tenant living in a one-bed property in Cardiff is unlikely to have a shortfall between the LHA rate and their rent, but someone living in a similar property in Powys will experience a £15 a week shortfall.

A particular issue in some areas is the small sample sizes used to calculate LHA rates. The CHC analysis suggests that this significantly reduces the likelihood that the lowest third of rents will be affordable:

  • In Carmarthenshire, the SAR is based on a sample of just 21 rents and only three of the 21 rents sampled are affordable
  • In Cardiff, Flintshire, Neath Port Talbot, North West Wales and Pembrokeshire, tenants in receipt of SAR are only receiving enough housing benefit to access the bottom 10% of the rental market.

CHC chief executive Stuart Ropke said:

‘This flawed policy will make social housing unaffordable for those it was built for and for those who need it most. Tenants face a postcode lottery where, for example, in Neath Port Talbot, they’ll only be able to afford to access the bottom 2% of the market.

‘Our research also proves that the poorest areas in Wales will face the highest shortfalls under this policy, further entrenching poverty in many Welsh communities and reiterating why this policy is a devastating move for tenants across Wales.’

The CHC report suggests that some changes could be made to the methodology, for example by using larger sample sizes, to make LHA e more affordable.

However, it concludes the LHA cap is an unsuitable measure for the social rented sector and that shortfalls will continue to exist in some areas regardless of any changes:

‘The intended policy will restrict access to affordable housing for tenants who are unable to “top up” their LHA through other means. Housing associations are likely to feel the strain of increasing rent arrears as tenants struggle to make up this shortfall, and this would be in addition to the impact that will already be felt by tenants and housing associations from universal credit.

‘It will consequently have a severe impact on the viability of developing affordable housing across Wales at a time when the sector has a commitment to develop 12,500 affordable homes by 2021.’


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