Local Housing Allowance unfrozen and raised to 30th percentile of rents

Local Housing Allowance has been unfrozen and raised to the 30th percentile of rents, according to the Autumn Statement, as set out in the abrdn Financial Fairness Tracker published in December 2023¹. The same document records the uprating of working age benefits to the September inflation rate of 6.7% from April 2024, and the uprating of the state pension by 8.5% from April 2024 in line with the increase in earnings¹.

The tracker, based on a survey of 5,594 households conducted in October 2023, also lists the age threshold for receiving the full National Living Wage reducing to 21, and the latest round of Cost of Living payments that many households started receiving from November 2023¹. It notes the energy price cap rising by £94 per year from January 2024, and separately records a 5% increase in the energy price cap expected from January¹. The prepayment meter price premium was scrapped in July 2023, saving prepayment households around £21 a year on their bills¹.

The report gives the wider financial position of households at the time of the survey. The number of households in serious financial difficulties rose from 2.8 million, or 10% of all households, in October 2021 to 4.8 million, or 17% of households, in October 2023¹. The Consumer Price Index was 4.6% in the 12 months to October 2023, down from 6.7% in September 2023 and from a peak of 11.1% in October 2022¹. Private rental prices paid by tenants in the UK increased by 6.1% in the 12 months to October 2023, the largest annual change since the data series began in January 2016¹.

On hardship, 9% of all households reported having used a foodbank in the past six months, up from 6% in October 2022, rising to 24% of those in receipt of income-related benefits and 20% of those receiving disability-related benefits¹. Two-thirds (65%) of those in serious financial difficulty had taken on new debt in the past six months, compared with 19% of financially secure households, and 35% had borrowed money for daily living expenses in the past four weeks¹. Nearly half (46%) of households in difficulty reported owing more than £5,000¹.

Why it matters for households

The change to Local Housing Allowance affects the cap on rent that Help with rent: Housing Benefit, the Universal Credit housing element and Local Housing Allowance can cover for private tenants. Raising it to the 30th percentile of rents means the allowance is set against a different point in the local rent distribution than when it was frozen. The tracker does not state the cash value of the change for any area, and no figure for the resulting increase in individual awards has been reported¹.

Working age benefits rise by 6.7% from April 2024 and the state pension by 8.5% from the same month¹. The tracker records that 24% of households receiving income-related benefits and 20% of those receiving disability-related benefits had used a foodbank in the past six months, and describes the level of benefits as having become increasingly insufficient against rising costs¹. The interaction between the housing element and Housing Benefit is set out in Housing Benefit vs Universal Credit Housing Costs.

The energy price cap rose by £94 per year from January 2024¹. The tracker also records a two-year fall in real household income of 4% over 2022/23 and 2023/24, and that 32% of all households had problems with damp, mould or condensation, rising to 51% of those in serious financial difficulty¹.

What happens next

The tracker gives April 2024 as the date the benefit and state pension upratings take effect, and January 2024 for the energy price cap rise¹. It does not give a date on which the Local Housing Allowance change takes effect, and no further detail on the timing of that change has been reported¹.