Sem Moema, a Labour member of the London Assembly, said local housing allowance (LHA) rates have become so squeezed by inflation that only 2.3 per cent of the capital’s rental properties are covered by it in full.
The Government said it is working to “bear down on inflation to help everyone’s money go further”, but would not commit to un-freezing LHA.
In a letter to work and pensions secretary Mel Stride, Ms Moema said that by keeping LHA frozen, the Government “is causing significant hardship across the country and creating arbitrary differences between the support that different families can get depending on where they live”.
LHA rates are not intended to cover all rents in all areas, but rather to provide help towards covering some housing costs. As housing costs have sharply risen over recent years, the support has become ever more crucial to those who rely on it.
LHA is paid out to people on low incomes, either in the form of housing benefit or as the housing element of universal credit.
But the payment rates have been frozen since 2020, based on the 30th percentile of rents in September 2019.
Ms Moema, who represents Hackney, Islington and Waltham Forest on the Assembly, said that this means “families living in areas with higher rental growth since 2019 face larger shortfalls than otherwise similar families who live in areas with slower growth”.
London, she pointed out, already has some of the country’s highest rents. In her letter to Mr Stride, Ms Moema said the city’s rents have risen 20 per cent on average since 2019, though higher estimates have also been cited in recent months.
“The result is that only 2.3 per cent of properties available for private rent in London are affordable under LHA rates, compared to 5 per cent across England as a whole,” wrote Ms Moema.
She added that London Councils - a cross-party grouping of the city’s borough authorities - has “identified around 125,000 low-income London households at particular risk of homelessness because their benefit entitlements fall short of covering their rent”.
Rough sleeping in London has meanwhile risen by 21 per cent in the last year.
A Government spokesman said: “We are set to spend over £30 billion on housing support this year, on top of significant cost of living help worth around £3,300 per household.
“We’ve also maintained our £1bn boost to Local Housing Allowance while our Discretionary Housing Payments (DHPs) provide a safety net for anyone struggling.”
The “£1bn boost” mentioned by the spokesman refers to the last time LHA was increased, back in 2020.
DHPs are an additional form of support which people can apply for, but London Councils has warned that London’s allocation of DHP money “has historically not been sufficient to meet demand in the capital”.
The Governmment spokesman added: “On top of this, we have raised benefits and the state pension in line with inflation and increased the National Living Wage as we bear down on inflation to help everyone’s money go further.”
Similar concerns to those raised by Ms Moema were voiced by the House of Commons’ Levelling Up, Housing and Communities Committee, which said that it had “received a huge amount of evidence on the impact of current LHA rates”.
According to a report published earlier this year, the cross-party committee heard that “the freeze had driven many into poverty, forced some to accept properties in a state of disrepair and left others unable to find anywhere to live at all”.
The committee said the Government should “increase LHA rates to realign them with the 30th percentile in each broad rental market area, and commit to conducting a review as soon as possible into whether they should once more be aligned with the 50th percentile”.