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Capping housing benefit at Local Housing Allowance (LHA) rates could mean the rents of 200,000 more social tenants would not be covered, the Institute for Fiscal Studies (IFS) has said.
In a new report entitled The Cost of Housing for Low-Income Renters, the thinktank found that if the new LHA cap was introduced today, the number of social tenants whose rents are not covered by housing benefit would rise from 2.3 million to 2.5 million.
Currently the LHA cap, which limits the amount of housing benefit that a tenant can receive according to a locally determined rate, applies only in the private rented sector. From April 2019, it will be extended to social tenants.
The IFS said the LHA cap will have a greater effect on housing association tenants than on council tenants because rents in these properties tend to be higher.
Low-income pensioner households and households without children will be most significantly affected, as will Londoners, the IFS said.
The report also found that tenants on lower incomes tend to spend a higher proportion of their income on rent, even discounting housing benefit. Nearly half of low-income private renters – 43% – receive housing benefit, with 10% receiving enough to cover their rent fully.
The cuts to housing benefit since 2011, the IFS calculated, have saved the government £3bn a year, with this cost passed on to low-income renters.