New research indicates that only 5% of private rental listings in London are affordable for low-income households relying on Local Housing Allowance (LHA) to cover their rent. This alarming figure highlights the growing struggle for many to find affordable housing in the capital, as rental prices continue to rise.
The study also sheds light on the shrinking size of London’s private rented sector (PRS), which has made it increasingly difficult for residents to secure housing in the city. With demand for affordable rental homes already high, this trend is contributing to even more competition in the market, particularly for those on lower incomes.
The analysis reveals that the PRS in London had been steadily growing up until April 2021. However, from April 2021 to December 2023, approximately 45,000 rental properties were sold and not replaced. This reduction represents 4.3% of London’s privately rented homes, severely impacting the availability of affordable housing options.
The decline has hit the lower-cost end of the market hardest, with more affordable properties being sold off and not re-entering the rental sector. As a result, those who depend on LHA to secure housing are facing limited choices, further exacerbating the housing crisis in London.
The analysis was carried out by Savills, a high-end property agency, and was commissioned by London Councils and Trust for London.
Key findings from the analysis show that the availability of rental listings affordable to households relying on Local Housing Allowance (LHA) has steadily decreased throughout 2023-24. Despite the government raising LHA rates in April 2024 to cover the lowest 30% of local market rents, by the third quarter of 2024, only 5% of London listings remained affordable for those using LHA. The challenge arose because the LHA increase was based on September 2023 rental data, which failed to keep pace with the quickly rising rental market.
Another significant issue highlighted is the sharp rise in landlords selling rental properties to owner-occupiers. Between April 2021 and December 2023, 45,000 rental homes were sold, accounting for 4.3% of London’s private rental stock. The average value of these homes across the capital is £410,000, and they are not being replaced, shrinking the rental market further.
The most affordable areas for renting have been hit the hardest, with properties leaving the market at a much faster rate. In 2023, the lower end of the rental market saw a 3.3% monthly reduction in available listings, compared to 2.6% in other parts of London. This decline in affordable rental stock has a significant impact on low-income households, making it more difficult to access private rentals and hindering boroughs’ efforts to prevent homelessness, particularly when using private rental properties for temporary accommodation.
London is home to approximately 2.7 million private renters, which accounts for about 30% of the city’s population. Of these renters, over 400,000 rely on Local Housing Allowance (LHA) to help cover their rent costs. The availability of affordable private rental accommodation is, therefore, a critical issue, particularly for low-income Londoners who depend on this support. Accessing affordable housing is becoming increasingly difficult for this group as the number of reasonably priced rental properties continues to shrink.
A spokesperson from London Councils has highlighted just how serious the problem is. They referred to the latest figures as stark evidence of the immense pressures faced by low-income private renters across the capital. The shortage of affordable housing is not just a growing concern for renters, but it is also intensifying London’s homelessness crisis. With 2.7 million people relying on the private rental sector, the decline in available rental homes, particularly affordable ones, is a pressing issue for both residents and local authorities alike.
The London Councils spokesperson pointed out that the city’s homelessness emergency is largely driven by this shortage of affordable housing. The reduction in the availability of privately rented homes is making it harder for many Londoners to secure stable housing, which adds to the difficulties for boroughs as they work to address homelessness. Local councils are particularly concerned about the impact on low-income households, who face fewer and fewer options in the rental market.
In response to these challenges, there is growing recognition that action at the national level is essential. The spokesperson emphasized that the situation can only be improved through further intervention from the government. They believe that adjustments to national housing policies are urgently needed to prevent the situation from worsening, particularly by making sure that support systems like the LHA are adequately updated to reflect the rising cost of rent in the capital.
Specifically, the call for increasing LHA rates to keep up with rising rents was underscored as a key step in addressing the crisis. According to the spokesperson, such measures would not only help prevent homelessness but could also save public funds in the long term. By making housing more affordable for those on lower incomes, it would be possible to reduce the strain on emergency housing and related social services, creating a more sustainable solution to the growing problem.
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