The reform and subsequent freeze of local housing allowance has left many landlords questioning their future in the private rental sector, despite their pivotal role in supplying accommodation for the most vulnerable tenants. The return to rate freezing on 1st April 2025 has brought the issue of affordability, for both renters and landlords, back into focus, as LandlordBuyer discusses.
What is local housing allowance?
Local housing allowance gives those on low incomes help with the cost of renting a property in the private rental sector. Local housing allowance rates are used to decide how much someone gets in either universal credit (housing element) or housing benefit, with the benefit paid directly to the recipient.
Local housing allowance rates are decided by the Department for Work and Pensions (DWP), using information based on the list of rents provided by the Valuation Office Agency (VOA). The VOA collects data from letting agents, landlords, renters and other sources on an annual basis to gain an accurate market snapshot.
It endeavours to establish the typical private market rent a tenant would be expected to pay in the area where they might reasonably be expected to live. The data is then hared with the DWP and it uses this to calculate local housing allowance rates.
Local housing allowance rates have been frozen during 7 of the last 11 years and on 1st April 2025, rates were frozen again for the next year. This means they’ll be at the same level as 1st April 2023 to 1st April 2024. The current rates can be found here, with payments for 152 regions divided into five categories – A to E – based on the number of bedrooms per dwelling.
Stationary rates come at the same time as increasing costs to run a private buy-to-let (higher mortgage rates, more costly service charges and more expensive insurance policies are just three expenses). This has left many landlords with no option but to increase rents.
Have rent rises outpaced local housing allowance rates?
In short, yes. The average UK monthly private rent increased by 7.7% to £1,332 between March 2024 and March 2025*. Taking a more historical view, analysis of Statista data by Property Beacon found average rents increased by around £569 (or 121%) between 2013 and 2023.
The affordability gap between what low income renters can afford and what landlords need to charge is at one of its widest points ever. The situation is not sustainable for both parties, with property poverty evidenced across the sector and landlords forced into selling up - especially those in inner city areas.
Landlords losing confidence
History tells us low local housing allowance rates negatively impact landlord sentiment. A past report that monitored the impact of local housing allowance reforms (carried out by the Centre for Regional Economic & Social Research at Sheffield Hallam University), found the majority of landlords became more cautious about renting to local housing allowance tenants and developed concerns about their future income.
The report also found landlords were prepared to terminate tenancies or not renew existing contracts if local housing allowance tenants accrued arrears as a result of compromised affordability.
Sell with sitting tenants
LandlordBuyer is already helping landlords who accept tenants in receipt of housing benefit, helping them weigh up their future in the private rental sector. We share the concerns that exiting the market can fuel homelessness, so we are offering a better alternative to selling vacant lets.
We make cash offers for tenanted properties, including those where the tenant uses benefits to partly or fully pay their private let. LandlordBuyer will seamlessly take over the tenancy, with the renter staying in the property undisturbed.
If selling your buy-to-let is something that appeals to you, request your free, no obligation valuation now. Our team is also available to discuss more complex situations and to facilitate the sale of entire buy-to-let portfolios – contact us today.
* Office for National Statistics