Save, make, understand money

Buy To Let

Broken benefits system ‘leaves renters footing the bill for coronavirus’

Emma Lunn
Written By:
Emma Lunn

Tenants are losing £53m a month because the benefits system is failing to cover their rent, according to Generation Rent.

According to the campaign group, between February and August the number of private renters claiming benefits increased by 36% (507,000 households).

Two in five (42%) private renters – 1.9m households – now rely on Universal Credit or Housing Benefit to pay their rent. But benefit rates mean that 538,000 households can’t cover their rent.

Ahead of the chancellor Rishi Sunak’s Spending Review, Generation Rent is calling on the government to increase benefits available to private renters to avert a homelessness and debt crisis.

Generation Rent looked at how private renters had been affected by the economic shock of coronavirus in each parliamentary constituency in England. To do this it used benefits caseload data and local housing allowance (LHA) rates from the Department for Work and Pensions, population estimates from the English Housing Survey, and rent data from the Valuation Office Agency.

The support private renters can get with their rent is based on their income and LHA, which is designed to cover the rent on the cheapest 30% of homes in a local area.

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.

Generation Rent found that 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 £2,817 per month but the LHA is just £1,417, leaving a gap of £1,400.

The average gap between the monthly 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.

Generation Rent estimates that across England, 538,000 private renter households receive LHA but do not live in the cheapest 30% of homes. This results in a shortfall between their benefits and their rent, worth a collective £53m a 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, Generation Rent has called on 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, and
  • Scrap the household benefit cap and restrictions on eligibility for Universal Credit

Alicia Kennedy, director of Generation Rent, said: “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.”