The amount a claimant receives in housing benefit is based upon the local housing allowance rate. This rate is calculated every month by the rent officer assessing non housing benefit rents within the local area and calculating the 30 percentile of those rents. This provides a monthly figure. As market rents rise (or fall) so, does the LHA rate.

Once a claimant tenant is on housing benefit, the rate remains the same for the claimant for up to 52 weeks assuming no change of circumstances.

From April 2013, rather than the rate changing in this manner, instead it will rise in line with CPI inflation.

It has been reported (for example see here and here) that late December 2011 the DWP announced that the local housing allowance rate would freeze from April 2012 for a year and then as planned change to CPI from 2013.

As reported in SPeye, In a speech on 6 December 2011 in Parliament by Steve Webb at the DWP, it was stated:

On local housing allowance, at the emergency Budget in June 2010, the Government announced that from 2013, local housing allowance rates will be calculated annually by using the lower of the rent at the 30th percentile of local rents or the previous year’s rate uprated by reference to CPI. This will end the monthly uprating of LHA rates and bring the system into line with the uprating of other pensions and benefits. As part of the preparation for this change, we need to fix LHA rates, to establish a baseline from which they will be uprated in future. As the new cycle for uprating LHA will be annual, we have decided that the baseline should be one year ahead of the first uprating event. Therefore, LHA rates will be fixed from April 2012. This approach means that there will be no reductions in ongoing awards as a result of this change

The legislation bringing in these changes namely, the Rent Officers (Housing Benefit Functions) (Amendment) Order 2012 has now been published and takes effect on 2 April 2012. This Order amends the local housing allowance calculation so that the rate payable to a tenant will now be lower of either:

  • the median of the lowest 30% of the rental market or
  • the median of the lowest 30% of the rental market in the previous year, subject to an increase for inflation in line with the Consumer Prices Index.

The Order has the effect that the LHA rate will freeze throughout 2012 (from 2 April) and then from 1 April 2013, the LHA will adjust according to the above calculation.