The Local Housing Allowance (LHA) has been a lifeline for struggling renters and landlords during the coronavirus pandemic.

The allowance, available to tenants in the private rented sector, was last set in April to cover the lowest 30% of rents in any area.

Published alongside today’s Spending Review, however, were plans to freeze the allowance in cash terms from next year, rather than permitting the allowance to increase in line with inflation.

The National Residential Landlords Association (NRLA) is warning that the announcement is a blow for both renters and landlords struggling with the consequence of rent arrears through no fault of their own.

The current rate was set in April to help renters whose incomes had been affected by the pandemic to meet the cost of their rents.

In its report, the Office for Budget Responsibility said the decision to freeze the allowance in cash terms meant the original £1bn cost of the measure in 2020/21 would decline to £0.3bn by 2025/26 and LHA rates would fall back below the 30% of cheapest local rents over time.

Recent analysis by the Joseph Rowntree Foundation suggested that 5% (200,000) of households in the private rented sector are in arrears. Some 30% of all private rented households are worried about paying their rent in the next three months, compared to 19% immediately pre-Covid-19.

Ben Beadle, chief executive of the NRLA, said: “Many renters and landlords are struggling with the consequence of rent arrears through no fault of their own yet the government is failing to take the action needed to address this.

“While the chancellor has spoken about the need to support those who find themselves homeless, it would be much better for all concerned to provide the funds needed to sustain tenancies in the first place.”