PM scraps Local Housing Allowance caps for social housing

27 Oct 17

Plans to cap housing benefit at Local Housing Allowance rates in social housing have been scrapped, the prime minister announced this week.

As part of this, Theresa May told the House of Commons on Wednesday the LHA cap would not apply to supported housing, which houses vulnerable people.

“We will not apply the Local Housing Allowance cap to supported housing,” she told MPs. “Indeed, we will not be implementing it in the wider social rented sector.”

She explained funding for supported housing was an issue the government had been looking into for the past year, since former work and pensions secretary Damian Green initiated a consultation into the matter in September 2016.

May told MPs the government would reveal more on its plans for funding supported housing in its response to the DWP consultation on Tuesday next week.

She said there was a “need to ensure the funding model is right” for supported housing so that “all providers…are able to access funding effectively”.

The government would also take into account issues, such as the “significant increases in service charges that have taken place recently”, she added.

Former chancellor George Osborne announced in the 2015 spending review that LHA – currently applied to tenants on benefits living in private rented sector accommodation – would apply to new tenants in the social sector from April next year.

The announcement was widely condemned, particularly because of the ambiguity as to whether it would apply to supported housing.

Various groups, including housing providers, have been campaigning to stop LHA applying to supported housing.

Supported housing developers claimed that uncertainty over future funding for this type of housing was stalling development. 

Terrie Alafat, chief executive of the Chartered Institute of Housing, called the government’s announcement “great news”. 

She said: “CIH has consistently called on the government to rethink its plans to cap housing benefit for people living in supported housing at Local Housing Allowance rates, because it would have put homes for some of the most vulnerable people in our society at risk.

David Orr, chief executive of the National Housing Federation, tweeted:

In April, the work and pensions and communities and local government committees issued a joint report on applying the LHA to supported housing.

Clive Betts, chair of the communities and local government committee, said: “Our joint report told the government that the LHA rate was ‘an inappropriate starting point for a new funding mechanism’ and a serious threat to the future viability of the sector”.

Frank Field, chair of the work and pensions committee, said May’s announcement was “an important step towards protecting and boosting the supply of this crucial support for the most vulnerable”.

LHA is calculated by looking at broad rental market areas and is aimed at giving people access to the cheapest 30% of the private rental market.

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