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1.9m Renters Affected by Housing Benefits Freeze, which Attracts Widespread Criticism


04/01/2023
Author : Ian Barbar

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1.9m Renters Affected by Housing Benefits Freeze that Attracts Widespread Criticism

The UK government released the Autumn Statement 2022 on 17 November 2022. In the small print of the statement was a big announcement about the freezing of Housing Benefits at 2020 levels. The most obvious outcome of this move is more arrears and tough times for tenants.

Most people have rent as their biggest outgoing. While Universal Credit will help them take care of the other essentials, not covering rent in this plan has been panned by experts as a wrong move that could have major ramifications. The mental health impact has not been assessed and have landlords not been taxed enough already, all this when there are court backlogs hampering getting vacant possession to relet a property to someone who can pay.  Again, low-income families will be hit the hardest.

Refusing to unfreeze housing benefits means the rental crisis will worsen, and homelessness will increase this winter.

This is in addition to the seven percent rent rise cap for tenants in the social housing sector recently announced by the government. However, no barrier to rising rents was imposed on the private sector.

Experts say that the government could have provided relief to the distressed households by freezing rents, suspending no-fault evictions, and relinking Local Housing Allowance to actual rents. The Autumn Statement has little to offer to the 1.9 million private renters in the UK who rely on housing benefits to cover their rent.

Housing benefits remain stuck at levels set in 2018-19, yet rents are rising at their fastest rate in 16 years. The government's move to freeze housing benefits is expected to put a secure home beyond the reach of more people than ever before - all the while the shortage of housing and asylum and economic migration crises continue.

The Autumn Statement indicates that the government is not doing enough for renters, especially during a recession and when the country is going through an unprecedented cost of living crisis.

Homelessness charity Shelter says that the previous Local Housing Allowance (LHA) freeze until March 2023 is a crucial reason why people are grappling with homelessness. The charity said the LHA covers the cheapest third of rents in just 3% of English local authorities. This is compounded by the benefit cap, which now impacts 120,000 households. The LHA (which is calculated differently for each local authority across England) helps the government decide how many people on benefits can claim assistance with rent for renting in the private sector. An LHA freeze means those renting private properties will receive the same level of support even when rents increase.

The Consumer Price Index hit 10.1 percent this month, which means the freeze will bring more bad news for those relying on housing benefits.

The Autumn Statement has five announcements directly applicable to the private rental sector.

1  The bad news for landlords is about halving the Capital Gains Tax annual exemption. It will be reduced from 12,300 to 6,000 in 2023/24 and again to 3,000 in 2024/25. It will also impact second homeowners and those who want to sell their property for capital gains tax.

2  The statement announces reducing the dividend allowance from 2,000 to 1,000 next year and then to 500 from April 2024. By 2025, landlords receiving dividends more than this amount will have to pay tax, the rate of which will depend on the income received.

3  The statement allows local authorities to raise council tax by three (plus two percent for those with social care responsibilities) without holding a referendum. This can add more pressure on private tenants.

4  The Stamp Duty cuts will be time-limited. They will end on March 31, 2025. This move will help firms relying on the housing market to overcome current challenges.

5  The government has also frozen Inheritance Tax thresholds for two more years. It makes thousands of homeowners liable to IHT.

Stakeholders in the UK property sector have urged the government to reconsider the decision to freeze housing benefits because it will lead to a chronic shortage of homes for private rent. 


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