Universal Credit shortfall leaving low-income households at risk of homelessness

Single people and small families receiving Universal Credit are at increasing risk of homelessness in parts of the north west, including Oldham and Rochdale, because of a persistent shortfall between the benefit and the true cost of renting.

According to a new report from Crisis for the launch of its Cover the Cost campaign last week (Thursday 9 May), the gap is leaving households facing the choice between paying for essentials like food and bills or paying their rent – and in the most severe cases, increasing their risk of homelessness.

The loss of a private tenancy is currently the number one cause of homelessness across England.

Some of the least affordable areas in the region include Oldham and Rochdale, where just 10% of two-bedroom rented houses were affordable for small families receiving Universal Credit in 2018/19 compared to 42% in Wirral, where the highest percentage of affordable houses were recorded, and 6% in Southern Greater Manchester, where it was lowest.

For single people under 35 receiving the shared accommodation rate in Oldham and Rochdale, just 8% of rooms were affordable, compared to zero in North Cheshire and 32% in Wirral.

In Oldham and Rochdale, couples and single people over 35 could afford 18% of rented accommodation. This was lowest in Southern Greater Manchester (7%) and highest in Wirral (36%).

For those already sleeping rough or in temporary accommodation, like hostels and B&Bs, the shortfall means finding a safe and stable home to build their future in – particularly as the number of social homes declines – is near impossible.

Local Housing Allowance (LHA), which is administered under Universal Credit, is supposed to provide financial support to those on low incomes who are unable to meet housing costs. Those who are single and under 35 receive a lower rate of LHA - the Shared Accommodation Rate – which is supposed to cover rent for rooms in shared houses.

However, since 2011 there have been cuts to LHA – meaning it has stopped keeping up with rising rents – and in 2016 it was frozen altogether. Figures from the charity show that as a result, fewer and fewer homes have been affordable to those receiving the benefit as rents across the region continued to rise.

Previously, LHA rates were set to ensure that recipients could afford at least 30% of properties in their area, giving households more opportunity to find safe and stable homes.

But with rents rising year on year, affordable rented accommodation has become harder and harder to come by.

For those unable to find properties their benefits can cover, renting anything else in the cheapest 30% of the market is leaving a weekly shortfall. For small families renting a two-bed home in Manchester this amounts to almost £17 – the equivalent of one and a half weeks’ worth of electricity or gas. The monthly shortfall (£67.80) is equivalent to more than a week’s worth of food in the region.

The build-up of pressure caused by these shortfalls means many households are having to make impossible choices between paying their rent and keeping up with bills or paying for essentials. Others are being left facing the risk of losing their home altogether.

Councils in the north west are being left to pick up the pieces for those who do become homeless, spending tens of millions of pounds on homelessness services and housing people in temporary accommodation.

Until there are enough social homes to house people on low incomes, Crisis is calling on government to commit to restoring LHA rates in the next spending review so that it once again covers the cost of renting at least 30% of properties in any given area, and that it keeps up with rises in rents each year.

Steve Harding, Director of Crisis Skylight Merseyside, said: “We all deserve the dignity and stability that a safe and decent home provides. Yet the widening gulf between Universal Credit and private rents is leaving many in the north west living on a knife-edge. More and more people are forced to make impossible choices between keeping up with the rent and paying for essentials like food and bills, all the while knowing that falling behind with payments could cost them their homes.

“Universal Credit can be a tool to prevent homelessness, but only with the right investment – and that’s why we are launching this campaign today. We need to see government bring Universal Credit back in step with the true cost of renting. This will drastically reduce council spending and will provide greater reassurance to private landlords that people on Universal Credit can afford to pay their rent each month.

“Most importantly, it will stop people becoming homeless in the first place while giving those on the lowest incomes the safe and stable homes they need to build their futures.”