The Private Rental System (PRS) is now largely unaffordable to new entrants or those seeking to move within the sector who are in receipt of Local Housing Allowance (LHA). That’s the result of new research commissioned by the Chartered Institute of Housing (CIH) Scotland in partnership with Fife Council. It highlights the shortfall between LHA and the actual cost of renting a home in the private rented sector .

Commenting on the results Gavin Smith, Chair of CIH Scotland said:

“The PRS is a vital part of our housing system and can play a greater role in preventing and responding to homelessness in Scotland. We cannot ignore the link between affordable housing supply, the rising number of people in temporary accommodation and the emergence of Scottish councils having to declare housing emergencies.

“The PRS plays a vital role but must be affordable and as this research shows freezing LHA rates has had a devastating impact on its affordability for those that need it the most. All UK governments must urgently unfreeze LHA rates”

The report found that on average, just one in 12 (eight per cent) of properties in Scotland in the financial year 2022-23 were ‘affordable’ (in the sense of there not being a financial shortfall) for private tenants receiving LHA. This also means that the sector is increasingly beyond new tenants as time goes on and new rents spiral ever upwards.

Local Housing Allowance is a way of working out new claims for Housing Benefit for tenants renting accommodation from a private landlord. It also affects tenants already getting Housing Benefit who move into accommodation rented from a private landlord.

The table below shows the Local Housing Allowance rates for Orkney from 1 April 2022.

How Local Housing Allowance rates are calculated

Local Housing Allowance (LHA) rates are decided by the Department for Work and Pensions (DWP) using information provided by the Valuation Office Agency (VOA).

LHA rates are based on private market rents being paid by tenants in a Broad Rental Market Area (BRMA). This is the area within which a person might reasonably be expected to live.

These rents are being paid by people with the same number of bedrooms as the property where you live, or the number of rooms you and your household needs.

VOA rent officers collect rental data from letting agents, landlords, tenants, and other sources.

This data is then shared with DWP on an annual basis.

You can find the current LHA rates on LHA-Direct by searching by postcode or local authority area.

You can also check how many bedrooms you may be eligible for, based on the number of people in your household.

Advertised rents are currently rising due to a variety of factors including constrained supply, increased demand and rising costs. LHA rates have been frozen and are currently insufficient to cover advertised rents according to the research. LHA was introduced by the DWP as part of a UK Government initiative and is a reserved matter.

On the 12th of November a joint letter was sent by Paul McLennan, Minister for Housing in the Scottish Government and Maureen Chalmers, COSLA Community Wellbeing spokesperson to Mel Stride, Secretary of State for Work and Pensions in the UK Government.

In the letter they expressed their “deep concern about the ongoing freeze to the rates of Local Housing Allowance (LHA) and to request that LHA rates are reviewed and adjusted to reflect current housing market conditions. LHA rates no longer provide genuine support to those who need it most and the freeze is making life very difficult for private sector tenants in Scotland.”

“The UK Government’s decision to freeze LHA rates at 2020 levels for three years running has cut support to private sector renters to the point that some areas are simply unaffordable for those in receipt of housing benefit/universal credit in Scotland. Freezing LHA rates is likely to increase poverty and inequality; it hinders the efforts of the Scottish Government and local authorities in our core missions to tackle poverty and prevent homelessness. “

Andrew Watson, lead author of the research by the UK Collaborative Centre for Housing Evidence (CaCHE)  said:

“Due to changes in housing choices and a lack of social housing, the PRS plays a critical role in the provision of homes for households in receipt of LHA. A combination of rising rents and frozen LHA rates have rendered the sector unfordable for those seeking entry, whilst also limiting the ability of existing tenants to move within the sector.

“The lack of affordability has many drivers, but the actions of UK and Scottish Governments (and in particular the freeze in LHA rates and the introduction of rent caps) have played a significant role. It is therefore reasonable to expect that government action will play a key role in addressing the problem.”

Click on this link to access the report: Rapid Rehousing Transition Plans: Assessing the affordability of the private rented sector for LHA recipients in Scotland

Fiona Grahame