Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 21
21
Rejected
Re-freezing Local Housing Allowance rates risks undermining homelessness funding and increasing costs.
Conclusion
We are also concerned that the Government’s decision to re-freeze Local Housing Allowance (LHA) rates from April 2025 will undermine the impact of additional homelessness grant funding. We have seen compelling evidence that this is a false economy. Re-freezing LHA rates is likely to leave many families unable to afford rising private sector rents, placing them at risk of homelessness and relying on temporary accommodation. It is far more expensive for local authorities to support families once they are in temporary accommodation. (Conclusion, Paragraph 88)
Government Response Summary
The government justified its decision regarding Local Housing Allowance rates by outlining factors considered for 2025/26, reiterating its broader housing support spending, and highlighting other funding for homelessness prevention, implicitly rejecting the committee's concern about the re-freeze.
Government Response
Rejected
HM Government
Rejected
The Government currently spends around £34 billion annually on housing support including around £12 billion in the private rented sector. Local Housing Allowance (LHA) rates, which set the maximum level of support in the private rented sector, were last increased in April 2024 costing approximately £7 billion over 5 years. When considering LHA for 2025/26, the Government considered a range of factors, such as the rental market; impact of LHA, including the impact on cross-government issues such as homelessness; and the fact that rates had been increased the previous year. In the challenging fiscal context, at Autumn Budget the Government prioritised investing £1 billion in funding for both the Household Support Fund (HSF) and Discretionary Housing Payments (DHPs) (including Barnett impacts) for 2025/26, maintaining DHP funding at the same levels in England and Wales. This allows councils to provide discretionary support to those most in need. DWP continues to work closely with MHCLG to make sure that links between housing and benefit policy are considered, including when the LHA rates for 2025/26 were considered, and through the homelessness Inter-Ministerial Group. Any future decisions on LHA will be taken in the context of the Government’s missions; goals on housing; and which measures can best meet Government ambitions within the challenging fiscal context. The most recent increase in April 2024 cost around £7 billion over 5 years. We have increased the Homelessness Prevention Grant (HPG) by £192.9 million in 2025/26 and created the 49% ringfence to be spent on prevention, relief and staffing activities, so that more work can be done to prevent families from entering temporary accommodation and save costs in the long-term. The HPG was never intended to meet all costs of temporary accommodation. Local authorities can also draw on the wider government settlement, which is over £69 billion in 2025/26. The HPG increase of £192.9 million also took into account the increase in temporary accommodation pressures in 2025/26. The decision on the level of the prevention ringfence was made based on local authority spend declarations submitted in 2023/24, which showed that an average of 49% of total HPG funding was spent across these activities. We will continue to monitor local authority spend throughout 2025/26.