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“Squeeze set to get worse” as rents set to outstrip housing benefits 14% by 2025

Low income renters will be £1,370 short of secure housing within 18 months if rent inflation continues, according to a new report. 

The affordability gap between private rents and housing benefits will be as bad as it is currently by the end of 2025 unless action is taken, Generation Rent has warned.

Rent inflation will see low income households paying 14.2 per cent above available social support again within 18 months, said the campaign group.

For those renting an average two-bedroom home in the UK, that would mean a shortfall of £1,370 a year – more for those living in London where rents take up to 46 per cent of income for the poorest tenants.

Autumn Statement didn't go far enough

Chancellor Jeremy Hunt announced a temporary unfreezing of Local Housing Allowance (LHA) in his 2023 Autumn Statement.

LHA has been frozen for four years, while rents went up 18.9 per cent higher than the allowance calculated Generation Rent.

The reset, which comes into effect in April 2024, should make the bottom 30 per cent of the rental market more affordable to people on low incomes.

"For renters, the cost of living crisis is far from over”

But with rents predicted to grow another 8.5 per cent by late 2025, said the campaign group, the reprieve will only be temporary if LHA is frozen once again.

“While the cost of living crisis might be easing for many, the squeeze is set to get worse for renters,” said Ian Mulheirn, chair of Generation Rent

“Inflation across the economy may have peaked, but for renters the cost of living crisis is far from over,” he added.

“Rents are by far the biggest spending item for millions of people in the private rented sector, but rent growth lags behind inflation in other goods and services.”

Rent rises will see more families risk homelessness

While inflation is currently at 6.7 per cent, according to the Bank of England, the latest figures from the Office for National Statistics suggest lived experience of inflation is closer to 8.2 per cent – mainly due to housing costs.

If LHA continues to lag behind rent increases, more families will be at increased risk of eviction and homelessness warned Generation Rent.

“It is past time for the government to relink LHA"

There are now 105,750 households in temporary accommodation, with over 82,000 of them in London.

“Last month’s announcement of an increase in LHA is sorely needed but will be overtaken quickly by actual rents,” said Dan Wilson Craw, Generation Rent’s deputy chief executive. 

“Tenants facing painful decisions today will be in the same position in two years’ time, added 

“It is past time for the government to relink LHA with local rents permanently so support automatically adjusts to housing costs every year.”

As well as permanently unfreezing LHA, Generation Rent is calling on the Government to increase the number of social homes built so that people aren’t forced to rely on the private rental sector. 

Generation Rent’s forecast model is based on figures from the Office for National Statistics and the Office for Budget Responsibility. 

A recent report from Savills calculated that London rents have gone up 31 per cent since 2021, and could increase another 4.5 per cent next year.

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