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Number of private tenants facing rent shortfall leaps by nearly 50% in pandemic

Campaigners call for Rishi Sunak to increase rent support to end the rent debt crisis and prevent rising homelessness

Chaminda Jayanetti
26 February 2021, 9.57am
The chancellor, Rishi Sunak, has been urged to consider measures to help struggling renters in the upcoming Budget
WIktor Szymanowicz/NurPhoto/PA Images

More than 700,000 private tenants in Great Britain are unable to cover their rent due to shortfalls in the Universal Credit system – a rise of 45% since before the pandemic began.

Analysis of the most recent data available, published this week by the Department for Work and Pensions (DWP), shows that in November 2020 715,326 privately renting households on Universal Credit were not receiving their full rent in benefit, due to the stark difference between average rental prices and the maximum amount payable.

“Every one of these households faces an impossible choice every month to pay the rent, borrow, or go without essentials,” Alicia Kennedy, director of Generation Rent, said. ”The government’s inadequate support for private renters is pushing families deeper and deeper – into debt, with homelessness and destitution awaiting once the crisis of the pandemic clears.

Kennedy called on the chancellor, Rishi Sunak, to “act decisively” in next week’s budget, “to end the rent debt crisis and bring peace of mind to private renters who have been hit the hardest by the economic shock.”

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Every one of these households faces an impossible choice every month to pay the rent, borrow, or go without essentials

The shortfalls arise because the level of housing support paid to private tenants is capped under the Local Housing Allowance (LHA). In the past, the housing benefits could pay up to the average private rent in a given area. But the 2010 coalition government reduced the maximum amount payable.

Under the current system, benefits will only pay rent up to the cheapest 30% (the 30th percentile) of local market rents. For example, if an area’s average monthly private rent is £500, but the 30th percentile is £300, a tenant in an averagely priced property will receive £300 in housing benefit, leaving a £200 shortfall each month.

The maximum housing support payable was reduced even further between 2016 and 2020, due to the benefit freeze, but it was restored to the 30th percentile in the Budget last March.

But Shelter warned after that even after the changes of the 2020 Budget “the majority of renters will not have their full rent covered by LHA… This will limit the power of housing benefit to prevent hardship and homelessness. It will place huge pressure on renters, most of whom will have no option to increase their income during this time.”

The proportion of privately renting claimants left with a shortfall on their rent has actually fallen; it stood at 69% last February, but fell to 53% in April and has remained at around that level since, according to DWP figures. But the dramatic rise in the number of private renter households claiming Universal Credit – the main benefit payment for people in the UK who are unwaged or on low incomes – means the total number of people affected has risen markedly.

Many have applied for housing benefit in a bid to safeguard their home, only to find the support available doesn’t even come close to covering their costs

As of January 2021, six million people were claiming Universal Credit, up from 2.6 million in February 2020. At the start of this year, Citizens Advice estimated from survey data that more than half a million private tenants across the UK were in arrears on their rent, owing an average of £700 each.

Private renters across the country have found themselves struggling to pay their rent during the pandemic as they’ve lost jobs or income,” Polly Neate, chief executive of Shelter, said this week. “Many have applied for housing benefit in a bid to safeguard their home, only to find the support available doesn’t even come close to covering their costs.”

Neate said people faced “agonising decisions to go without food or get into masses of debt just to pay their rent”.

She added that the “only way to prevent even more people becoming homeless while the pandemic continues” was for the government to “urgently review” levels of housing benefit payable.

A DWP spokesperson said: “We’ve taken unprecedented action to protect renters during this pandemic, including banning evictions, as well as increasing Local Housing Allowance rates, benefiting more than one million households by £600 a year on average. We’ve also raised Universal Credit by £1,040 a year, and Discretionary Housing Payments are available for those who need additional support.”

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