Crisis commissioned Alma Economics to examine a range of ten options for ending the freeze in Local Housing Allowance (LHA) rates, analysing the costs, benefits, poverty reduction and homelessness reduction for each option.

Key findings

• The results show the costs and benefits of the annual re-alignment of LHA rates with the 30th percentile of local private rents for each year during the 2019/20 to 2024/2025 period.
• The cost of this scenario reaches £1.9bn by 2024/25 and totalling £7.3 billion over the 6-year period modelled
• The welfare gains and financial savings of this scenario reaches £3.1 billion by 2024/25 and totalling £12 billion over the 6-year period modelled
• The net benefits of this scenario reach £1.3bn per year by 2024/25 and totalling nearly £5bn over the 6-year period modelled.
• The most significant benefit from the reform options comes from higher welfare from providing targeted support for low income households.
• In addition to the direct gains for LHA claimants (i.e. income flows), ending the freeze in LHA has important distributional effects; higher welfare for households at the lower parts of the income distribution
• The findings are based on a flexible micro-simulation model has been developed using a sample of LHA claimants drawn from Understanding Society, the UK Household Longitudinal Survey.

Reference

Alma Economics (2019) Local Housing Allowance: Options for reform, Crisis: London