Half a million private renter households are losing £53m a month because the benefits system is failing to cover their rent. That is the shocking finding uncovered in a report by Generation Rent
Editorial Team | 28th November, 2020
Between February and August the number of private renters claiming benefits increased by 36% - or 507,000 households.
Two in five private renters (42%) – 1.9m households – now rely on Universal Credit or Housing Benefit to pay their rent, but miserly benefit rates mean that 538,000 households can’t cover their rent.
The support private renters can get with rent is based on income and Local Housing Allowance (LHA), which is designed to cover the rent on the cheapest 30% of homes in a local area. The report found that the increase in Universal Credit applications has been highest in areas where the gap between LHA and average rents was widest, indicating that the parts of the country being hit hardest by the pandemic are where the benefits system is least generous.
That is generally big cities throughout the country - and Londoners have the worst of it:
The biggest increase in private renters receiving benefits was in Tottenham, North London, with an increase of 5,638 households between February and August. There the gap between LHA and the median rent on a two-bedroom home is £388 per month.
The constituency with the biggest gap is Kensington, where the median rent on a two-bedroom home is £2817 per month but the LHA is just £1417, leaving a gap of £1400.
The average monthly gap between the LHA on a two-bedroom property and median local rent in the 10 constituencies that saw the biggest increases in claimants was £277, nearly twice as high as the national average of £155.
Generation Rent - led by Baroness Alicia Kennedy, estimate that across England, 538,000 private renter households do not live in the cheapest 30% of homes so have a shortfall between their benefits and their rent, worth £53m per month, or £636m over the course of a year.
The economic shock of the pandemic has wiped out incomes and left millions relying on benefits for the first time. But the benefits system is not designed to cope with so many people relying on it for support, and is creating the most hardship in the areas hardest hit by the recession. Renters who are unable to pay the rent have four options: dip into savings (if possible), cut back on other essentials such as food and heating, take out a loan, or fall behind with payments.