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 from our latest report on the impact of coronavirus on private renters.
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 our income and Local Housing Allowance (LHA), which is designed to cover the rent on the cheapest 30% of homes in a local area. We 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.
We 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.
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. To avert an increase in debt and homelessness as a result of the pandemic, we have written to Rishi Sunak to take the following steps:
- Increase LHA to ensure that tenants are able to pay the rent
- Make grant funding available for those who have built up unmanageable debt due to the first wave of the pandemic
- Scrap the household benefit cap and restrictions on eligibility for Universal Credit
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.
As long as we have an inadequate safety net, and the rent is due, the government will be driving more than half a million households into debt and destitution. The Spending Review is a precious opportunity to get those people back on their feet.