Labour Must Unfreeze Housing Allowance: What London Landlords Need to Know Now

Why the LHA Freeze Matters to London Landlords

Propertymark, a leading UK estate agents’ body, has renewed calls for the government to unfreeze Local Housing Allowance (LHA) rates for 2026/27. Despite significant rent inflation in many parts of the UK, including London, LHA rates remain frozen, widening the gap between housing benefit support and actual market rents.

For landlords, especially those letting to tenants receiving housing benefit, this development has immediate practical implications. The freeze risks increasing rent arrears and tenancy breakdowns, adding operational challenges and financial uncertainty.

Understanding Local Housing Allowance and Its Impact

LHA sets the maximum housing benefit payable for private rented accommodation, based on broad rental market areas and property size. Since the freeze was first introduced, rents in London have continued to rise, with the HomeLet Rental Index showing an approximate 5-7% annual increase in many boroughs during 2023.

With LHA rates not reflecting this increase, tenants relying on housing benefit face widening affordability gaps. This raises the risk of missed rent payments and potential homelessness, which can disrupt landlord income streams and increase void periods.

Practical Implications for Different Landlord Profiles

• Single-unit landlords: Even one missed rent payment due to affordability can impact cash flow. Early engagement with tenants is critical.

• HMO landlords: Housing benefit tenants in shared accommodation may face compounded affordability challenges, especially as LHA rates differ by room size.

• Portfolio landlords: Multiple tenancies affected by LHA freezes can aggregate into significant arrears risk and management overhead.

• Accidental landlords: Those less familiar with housing benefit intricacies should seek advice to understand risks and support options.

Immediate Steps to Manage Risk and Support Tenants

1. Review tenancy agreements and rent arrears policies: Ensure your procedures for addressing arrears are clear, fair, and compliant. Consider whether more flexible payment plans may be appropriate.

2. Engage proactively with tenants on housing benefit: Open dialogue about affordability challenges can help identify solutions early, such as budgeting support or referrals to local assistance.

3. Monitor rent payments closely: Early detection of arrears enables timely intervention.

4. Stay informed on government announcements: While the freeze remains for 2026/27, policy changes may arise. Regularly check official sources such as the Department for Work and Pensions (DWP).

5. Coordinate with local authorities and support services: Increased pressure on homelessness prevention services is likely. Building contacts can facilitate tenant support.

Benchmarking Impact Locally

Specific data on the affordability gap varies by borough and property type. Landlords can benchmark by:

• Comparing current rents to published LHA rates for their area (available on GOV.UK).
• Tracking arrears trends within their portfolio.
• Consulting local housing charities or councils for insights.

Planning Ahead: Strategic Considerations

• Rent setting: Factor in LHA levels when considering rent increases, especially if reliant on housing benefit tenants.

• Tenant mix: Consider diversifying tenant profiles to mitigate concentrated risks.

• Financial buffers: Ensure contingency funds are adequate to cover potential arrears and void periods.

How Rentals & Sales Can Help

Our team offers tailored portfolio reviews, compliance audits, and rent setting strategies to help landlords navigate the LHA freeze landscape. We assist in refining tenancy management workflows and tenant engagement approaches to reduce arrears risk.

Contact us for a consultation to assess your portfolio’s exposure and develop pragmatic action plans.

Compliance disclaimer: This article provides general guidance and does not constitute legal advice. Landlords should consult qualified professionals for specific issues.