A study from the Chartered Institute of Housing shows in some areas the gap between the shared room rate of the LHA and the cheapest private rents in the area means virtually all of the properties are unaffordable.
Single under-35s can only claim ‘shared room rate’ to help pay their rent in the private sector.
Researchers found nearly all of the rental markets in England where the cash shortfall was greatest, less than a quarter of private rented homes were available at the LHA rate.
In 17 of those areas 10% or less of the market is affordable and in six, 5% or less is affordable. LHA is to help applicants access private rented property in the cheapest 30% of the private rental market but in some areas the gap between the LHA rate and the cheapest properties is now more than £30 a week.
Terrie Alafat CBE, chief executive at the CIH, said: “The results of this research are extremely worrying and highlight the extent to which housing is simply out of reach for many young, single people.
“LHA is supposed to give people access to the cheapest third of private homes in their area, but the gap between LHA and rents has grown so large in some areas that it wouldn’t cover rent on the majority of the homes available.
“This is particularly worrying given the freeze on LHA rates until 2020 at a time when private rents are continuing to increase.”
Alafat said the CIH feared that truly affordable rents will become harder to find for young people and this could increase homelessness.
She added: “We would urge the government to review LHA rates as this research highlights they clearly no longer reflect the price of renting in the private market in many areas.”
A government spokesman said: “This government is committed to an affordable private rental market that works for tenants and landlords.
“We continue to spend around £24bn a year on housing benefit and are increasing LHA rates in areas with high rent rises, benefitting 700,000 households.
“Meanwhile our housing White Paper sets out how we'll build more homes for rent and make sure renting remains affordable for working families.”
The DWP said 30% of the savings from the LHA freeze, introduced in 2015, will be put towards Targeted Affordability Funding (TAF).
This funding will be used to increase some LHA rates in areas with high rental costs. In 2017/18, the government will use TAF to increase 48 LHA rates by 3%, and it says further TAF will be available in 2018/19 and 2019/20.
The CIH report states its research takes full account of TAF that the government makes available to mitigate the effect of the LHA freeze in the worst affected areas.
