Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 22
22
Not Addressed
Evaluate the link between welfare reforms, Local Housing Allowance, and homelessness prevention funding.
Recommendation
MHCLG and the Department for Work and Pensions must use the Inter- Ministerial Group as an opportunity to evaluate the link between welfare reforms and homelessness, particularly regarding LHA rates. We agree with the Government on the principle that, as far as possible, homelessness funding should be directed towards preventing homelessness in the first place. The Group should consider how best to move towards this preventative model while ensuring there are no unintended consequences 48 for local authorities. Specifically, it should consider the impact of the 49% ringfence of HPG funding for prevention on local authorities that are currently spending a high proportion of HPG funding on temporary accommodation. (Recommendation, Paragraph 89)
Government Response Summary
The government reiterated its spending on housing support, the rationale for LHA rates and the HPG ringfence, and its commitment to monitoring HPG spend, but did not explicitly commit the Inter-Ministerial Group to evaluate the link between welfare reforms/LHA rates and homelessness or the impact of the HPG ringfence.
Government Response
Not Addressed
HM Government
Not Addressed
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.