Poorest households face ‘catastrophe’ as number of affordable rental homes for those on housing benefit drops by a third in five months
The gap between housing benefit and the actual cost of private rent has risen by 40% in just five months, Sky News has learned.
Figures from the homeless charity Crisis and Zoopla show that affordable homes in England, for those on housing allowance, have declined by more than a third.
It means only 8% of private rental properties, on average, are now affordable to those on housing benefit.
Around 1.7 million households in England currently rely on Local Housing Allowance (LHA) to pay their private rent.
The statistics, which were given exclusively to Sky News, show that for a one-bedroom property households now face gaps, or shortfalls, of over £950 a year on average.
People living in two and three bedroom homes are having to find more than £1,500 and £2,300 (respectively) a year extra on top of their housing benefit.
Crisis chief executive Matt Downie
Crisis chief executive Matt Downie said: “This isn’t a sort of prediction of things getting worse, it already is worse.
“We know that rough sleeping is going up. We know the councils have nowhere to put people.
“And unless, in the November financial statement, the government increases housing benefit in line with inflation, just like they’re talking about for other benefits, this is this is going to be catastrophic.”
Housing benefit levels have been frozen since early 2020 and are based on rents from 2018-2019.
Since then private rental rates have been rising at the fastest rate on record.
Mr Downie describes it as a “false economy”.
Percentage of homes in England affordable under Local Housing Allowance rates
He added: “Once somebody becomes homeless, they cost far more to the state and they have to be put in temporary accommodation or helped in other ways.”
The new figures show the poorest households in England are being almost completely priced out of the rental market.
Nicole Hamilton is living with her two-year-old son Logan in emergency accommodation in London
Nicole Hamilton, 27, is living with her two-year-old son Logan in emergency accommodation in London after fleeing domestic violence. She has been staying in a one room flat for months because she’s been unable to find an affordable rental.
The single mother works full time as a project manager but still needs housing allowance to pay rent.
That allowance, however, does not cover the local rents for a two bedroom property in the area where her son attends a childcare setting, and where her family live.
On the morning Sky News visited Nicole she had called the police out at 4.30am because somebody who looked like they were “on drugs” had been hammering on her front door trying to gain access while her son slept.
“I think it’s a bit unsafe,” she said, “I don’t really like it… the thing that is stressful at the moment is they don’t know how long I’m going to be here.”
Share of listings below current Local Housing Allowance rates in England
“(Estate agents) also hear that I’m a single mum I’m on benefits, even though I work full time …and my income is good, but because I use benefits as part of the system to help pay my rent nobody is interested.”
The private rental market has become saturated due to an increasing supply and demand issue.
Rising mortgage rates, changes in tax and legislation have pushed more landlords out.
Renters are also signing up for longer lets which means less stock available.
Inflation and the cost of living have meant that the widening gap between private rent and housing allowance is predicted to get worse.
Cllr David Renard, housing spokesperson for the Local Government Association, also called for the freeze on housing allowance to be lifted, as well as greater support for authorities.
“Councils need more resources in terms of being able to fund homelessness services and to recruit the necessary housing officers to provide that support.
“So local authorities are very short of resources these days because of the increased demand.”
The Department for Levelling Up, Housing and Communities released a statement saying: “Our Renters Reform Bill will deliver a fairer deal for renters, empowering them to challenge unjustified rent increases.
“During the pandemic we increased Local Housing Allowance significantly, benefiting over one million households by an average of over £600 a year. This is alongside our Energy Price Guarantee which will save households on average £700 this winter with an extra £1,200 of cost-of-living support for the most vulnerable.”
London saw the most drastic fall in affordable properties, almost halving since April.
The North East, which Zoopla says is the region with the highest proportion of one-bed properties available, has just a quarter of affordable one-beds.
London is second worst with 13%.
According to Crisis, five of the nine regions (the East, East Midlands, South West, West Midlands, and Yorkshire and the Humber), had fewer than one in 10 affordable one-bed properties.
Is there method to the madness? Donald Trump and his acolytes would have you believe so.
The US president is standing firm among all the market chaos.
Just this weekend, after US stock markets suffered their sharpest falls since the onset of the pandemic, Trump reposted a video on his social media platform Truth Social. This was its title: “Trump is purposefully CRASHING the market.”
Tariffs latest: ‘BE COOL’, Trump says as trade war escalates
The video claimed the president was engineering a flight to US government bonds, also known as treasuries – a safe haven in turbulent times. The video suggested Trump was deliberately throwing the stock market into chaos so investors would take their money out and buy bonds instead.
Why? Because demand for treasuries pushes up the price of the bonds, and that, in turn, lowers the yield on those bonds.
The yield is the interest rate on the debt, so a lower yield pushes down government borrowing costs. That would provide some relief for a government that has $9.2trn of government debt to refinance this year. Consumers also stand to benefit as the US Federal Reserve, the US central bank, would likely follow suit, feeling the pressure to cut interest rates.
A trader works on the floor at the New York Stock Exchange. Pic: Reuters
Trump and his treasury secretary, Scott Bessent, have made it a key policy priority to lower yields. For a while, it looked like the plan was working. As stock markets tumbled in response to Trump’s tariffs agenda, investors ploughed their money into bonds instead.
However, Trump may have spoken too soon. On Monday, the markets had a change of heart and rapidly started selling government bonds. Thirty-year treasury yields hit 4.92% on Wednesday, their biggest three-day jump since 1982. That means government borrowing costs are rising – and not just in the US. The sell-off has spiralled to government bonds worldwide.
Rachel Reeves will be watching anxiously. Yields on Britain’s 30-year government bonds, also known as gilts, hit their highest level since May 1998. They registered a 27 basis point jump to 5.642% today – that’s on track to be the largest one-day move since the aftermath of former prime minister Liz Truss’ “mini-budget” in October 2022.
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‘These countries are dying to make a deal’
This is a big deal. It is the sharpest sell-off in the US bond market since the pandemic. Back then, investors also rushed into bonds before dumping them and the motivations, on one level, are similar.
In 2020, investors sold bonds because they had to cover losses elsewhere in their portfolios. When markets fall, as they have done over the past few days, lenders can demand that an investor who has borrowed money stump up more cash against the value of their loan because the collateral against those loans has fallen in value. This is known as a “margin call”. Government bonds are easy to sell as investors “dash for cash”.
There are signs that this may be happening again and central banks, which had to step in last time, are alert.
The Bank of England warned today of the growing risks to financial stability. “A sharp increase in government bond yields could crystallise relatively quickly,” it said.
There are other forces weighing on government bonds. With policy uncertainty unfolding in the US, investors could also be signalling that US debt isn’t the safe haven it once was. That loss of confidence also seems to have hurt the dollar, one of the world’s safest places to park your money. It’s had a turbulent journey but is down 1.15% against a basket of safe haven currencies since Trump announced widespread tariffs on 2 April.
Some are even wondering if China could be behind some of this, dumping US government debt as a revenge tactic to hurt a president who has explicitly said he wants bond yields to come down. The country holds $761bn of US government bonds, second only to Japan. If this is the case, then the US-China trade war could rapidly be evolving into a financial war.
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