Universal Credit is the primary benefit that can provide financial assistance to private renters in the UK who are on a low income.
The part of the payment designed to help with rental costs is called the Housing Element.
For tenants renting from a private landlord, the calculation of this element is not based on your actual rent amount.
Instead, it is governed by a government formula that uses the Local Housing Allowance, or LHA, rates.
The amount you receive for your housing is paid as part of your overall monthly Universal Credit payment, and you are then responsible for paying your landlord directly.
Since the LHA rate may be less than your actual rent, you are often expected to make up the difference yourself.
This gap between the LHA and the rent you are charged is commonly known as a rent shortfall.
The government uses a combination of factors, including where you live and the number of people in your household, to determine your entitlement and establish the appropriate LHA rate for you.
What is the Local Housing Allowance and how does it affect my payment?
The Local Housing Allowance, or LHA, is a maximum amount of benefit the government sets for people renting privately in a specific geographical area.
The UK is divided into many different Broad Rental Market Areas, and each area has its own set of LHA rates.
The LHA is calculated based on what is known as the 30th percentile of local rents.
This means that if you are a private renter on Universal Credit, the maximum you will receive for your Housing Element is the lower of two figures: either your actual rent amount or the LHA rate that applies to your household and area.
How is the correct number of bedrooms calculated for LHA?
The amount of LHA you are entitled to is based on how many bedrooms the Department for Work and Pensions deems you and your household require, not simply the size of the property you live in.
The rules allow one bedroom for each of the following:
- An adult couple.
- Any other single adult aged sixteen or over.
- Two children of the same sex aged under sixteen.
- Two children aged under ten, regardless of their sex.
- Any other child.
- A non resident carer who provides you or your partner with necessary overnight care.
You must calculate your correct number of eligible bedrooms before you can look up your applicable LHA rate.
How do I find the correct Local Housing Allowance rate for my area?
Once you have established the correct number of bedrooms you are entitled to claim for, you can find the LHA rate on the government’s official website using a specific online tool.
You will need to enter your postcode or local authority area, and then select the number of bedrooms that applies to your household.
The tool will then show you the maximum monthly LHA rate for that size property in your Broad Rental Market Area.
This figure represents the maximum amount that can be included in your Universal Credit Housing Element.
What is the Shared Accommodation Rate and when does it apply?
The Shared Accommodation Rate, or SAR, is the lowest LHA rate.
It is specifically designed to cover the cost of a single room within a shared house or house in multiple occupations.
This rate typically applies to single people who are under the age of 35 and who do not have children living with them.
If you fall into this category, the SAR is the maximum amount of housing support you can receive, even if you rent a self contained one bedroom flat.
There are important exceptions to this rule, including for care leavers under 25, or people who receive the daily living component of Personal Independence Payment, who are usually entitled to the higher one bedroom rate.
Does the income of other adults in my home affect my housing element?
Yes, if you have other adults, who are not your partner, living in your home, this will affect your Universal Credit payment through a deduction known as the housing costs contribution.
The Department for Work and Pensions expects that these other adults, often called non dependants, will contribute towards your rent.
For each non dependent adult in your home, your total Universal Credit Housing Element will be reduced by a fixed amount per month.
This reduction is applied regardless of whether or not the non dependant actually gives you any money towards the rent.
Can my savings reduce the amount of Universal Credit I receive for rent?
Your savings and capital are taken into account for your overall Universal Credit entitlement, and this consequently reduces the amount you receive, including your Housing Element.
If your total savings and investments are above the £6,000 lower limit, your total Universal Credit payment is reduced.
For every £250, or part of £250, you have over the £6,000 threshold, your total monthly Universal Credit award is reduced by a set figure.
If your total savings are £16,000 or more, you are not entitled to receive any Universal Credit payment at all.
What can I do if the Housing Element does not cover all my rent?
If your actual rent is higher than your LHA rate, or if you have deductions applied for non dependants, you will have a rent shortfall.
In this situation, you must cover the difference between the Housing Element you receive and the rent you pay from the rest of your monthly Universal Credit payment or any other income you have.
If this is not possible, you may be able to apply to your local council for a Discretionary Housing Payment, or DHP.
This is an extra payment that the council can award if they feel you require further financial assistance with your housing costs, but it is not guaranteed and is subject to the council’s own budget.
