Extraordinary challenges of the Coronavirus crisis lead government to sign off significant increases to its Local Housing Allowance rates.
A 500,000-strong surge in the number of Universal Credit applications last week from tenants to pay their rent during the crisis has persuaded the government to raise its Local Housing Allowance (LHA) rates by up to 20% in some areas, it has been claimed.
The raise is good news for landlords, who will be able to raise their rents to catch up with the new higher LHA rates.
But it’s also good news for tenants, who have been funding an increasing rent gap over the past four years, during which LHA rates have been frozen despite rents rising.
Bill Irvine of consultancy UCAdvice.co.uk says the government’s decision, which on average will see LHA rates increase by between eight and ten percent across the UK, will inject some £800 million into the system this year.
The extra money, which is a direct response to the coronavirus crisis, cannot come soon enough for some tenants. London, in particular, has seen the gap between Universal Credit payments and local rents widen as the government’s controversial ‘benefits cap’ has been applied.
LHA rates are based on looking at the cheapest 30% of an area’s private rented market and then using that to set the local rate, even if tenants are forced by a lack of affordable stock to rent more expensive homes.
“When we last had a huge economic shock back in 2008 a very similar thing happened,” says Bill. “The government increased the LHA rates to help tenants and landlords survive the economic downturn.”