Where have the young renters gone?

The flaws of the Shared Accommodation Rate mean fewer young people are accessing the housing cost support they need

In our recent report, we detailed problems with the design, operation and impact of the Shared Accommodation Rate (SAR).

The SAR is the rate of Local Housing Allowance (LHA) that determines the amount of housing cost support that young Universal Credit and Housing Benefit claimants receive if they live in the private rented sector. If you are aged 16–34 and single with no children, you will only be supported to rent a single room in shared accommodation, at the 30th percentile of rent costs in your local area.

Thanks to a recent Freedom of Information request, we now know that fewer people are receiving housing cost support at the SAR level than we anticipated. Does this mean the problems with the SAR are less serious than our report concluded?

The answer, sadly, is no.

A mysterious caseload

Because the government doesn’t routinely release caseload information for Universal Credit claimants broken down by LHA rate eligibility, we estimated that there were between 150,000 and 300,000 claimants living independently in the private rented sector eligible for only the SAR. This was based on the November 2013 caseload figure of 198,000 for those on Housing Benefit (before the rollout of Universal Credit began).

We know there are around 20,000 legacy Housing Benefit claimants still receiving support at the SAR level in November 2023, but differences in how data is published meant we did not have an equivalent figure for Universal Credit. The government has in recent months declined to answer 2 parliamentary questions that asked for this information.

Now, finally, we have an answer.

To the nearest thousand, there were 112,000 people receiving housing cost support at the SAR level in November 2023. This is significantly below even our lower estimate of 150,000.

It is also 86,000 below the 2013 caseload figure. Where have they all gone?

There’s no demographic explanation: the number of people aged 16–34 today is almost identical to the number in 2013.

There’s no labour market explanation: the claimant count for 16–34 year-olds (a measure of the number of people claiming out of work benefits) was lower in November 2013 than in November 2023. People in work can also claim housing cost support, and the switch to Universal Credit has made this much easier, so we would have expected caseload numbers to go up, not down.

Disappearing act

So the bulk of the explanation almost certainly lies in the nuances of the LHA system.

The first thing to note is that all LHA rates have been frozen for several years, so the level of support available has fallen far below the actual cost of renting even low-cost housing. Some former or potential claimants will have earnings that lift them out of Universal Credit eligibility altogether, thanks in part to minimum wage increases. And remember that under-25s have a lower standard allowance, so they get lifted out even sooner.

Now that LHA has been uprated, some of these people will become eligible for housing cost support (again), and we may well see the caseload move back up towards 2013 levels. But there are reasons to believe that the design of the SAR will continue to prevent people claiming housing cost support.

The SAR means young people are expected to find rooms in shared housing, but in most areas there’s a chronic shortage of houses or flats of multiple occupancy (HMOs).

This means that for those who were accessing support at the SAR level last year, 88% have a shortfall between support and their actual rent. This compares to 64% for all Universal Credit housing element claimants in the private rented sector. This is because many will be living, by necessity, in more expensive property types.

If this is how people receiving support are faring, imagine how much worse it is for young people who don’t access housing cost support at all, because they cannot cover a rent shortfall with other sources of income. Living independently is simply not an option for them.

This problem would exist for young claimants even if there were greater HMO availability, and even if LHA had not been frozen for 4 years, because of flaws in how the SAR is calculated. Compared to other LHA rates, extraordinarily few data points (ie actual rent being paid in HMOs) are included in calculations to find the 30th percentile of local rent costs. And the data that’s collected seems to include student accommodation, which is generally cheap but not accessible to typical benefit claimants.

The two homelessness problems

We can be fairly certain that at least some of the missing 86,000 will be homeless. According to the latest available official statistics, almost half of people in England who were assessed as homeless or threatened with homelessness in 2022/23 were aged 16–34.

This is reflected also in the growing numbers of young people seeking Citizens Advice’s support on homelessness issues. Like Theo* who had to leave his previous property once it became unfit for human habitation. He’s currently sleeping rough and has been told by the council his only option is to look for private rented accommodation. Under the SAR he would be eligible for £390 a month for housing, but as he lives in a city where there is a competitive housing market and very high rents, there are no properties he can afford.

The 86,000 is also likely to include people not receiving housing cost support because they are still living with their parents (this is already the most common living arrangement for the 1.5 million 16–34 year-olds receiving Universal Credit).

They have a place to live, but not a home of their own. The SAR is preventing young people building an independent life, and as such can be a barrier to employment.

Last year, we advised Miriam* who is currently living with her parents in the Midlands. She has a job in London and wants to be able to move out so she can be closer to work. But having looked for accommodation in London, there is nothing that she can afford at her current wage. If she had been eligible for the LHA 1-bedroom rate, and despite being subject to the reduced standard allowance for those aged under 25, she would have been entitled to approximately £428 a month on top of her earnings from employment, enabling her to move out of her parents’ house and live closer to work.

The SAR needs reform. For too many young people, it doesn’t cover the real cost of renting, to the extent that housing cost support becomes not only inadequate, but entirely inaccessible.

*Names have been changed