Local Housing Allowance

Local Housing Allowance (LHA) is used to calculate Housing Benefit (for older legacy claimants) or the housing cost element of Universal Credit for private renters. The rate is set at the 30th percentile of rents in the Broad Rental Market Area (BRMA), based on bedroom entitlement: 1 bedroom for a single person under 35 (shared accommodation rate), scaling up to 4 bedrooms for larger families. LHA rates were frozen between 2020 and 2024, causing significant shortfalls against actual market rents. In 2024 they were restored to the 30th percentile, but ongoing freezes may widen the gap again. Claimants who find cheaper accommodation keep the difference (for up to 52 weeks); those who pay above the LHA rate must fund the gap themselves. Discretionary Housing Payments (DHPs) from the council can help bridge shortfalls in genuine hardship. LHA does not apply to social housing tenants; their eligible rent is based on their actual rent subject to bedroom standard rules.

What it means in practice. Two things decide your LHA rate, and neither is your actual rent. The first is where you live, defined by Broad Rental Market Area rather than by council boundary, so two streets a mile apart can attract different rates. The second is how many bedrooms your household is entitled to under the size criteria: one bedroom for each couple, each adult aged 16 or over, two children under 10 regardless of sex, and two children of the same sex under 16. Single people under 35 without children are normally limited to the shared accommodation rate, which is lower again, subject to exemptions including care leavers and people who have lived in hostels.

A worked example. Zainab is a single parent with a son of 4 and a daughter of 7. Because both children are under 10 they are expected to share, so she is entitled to the two-bedroom rate. She rents a two-bedroom flat at £1,100 a month, but the two-bedroom LHA rate for her area is £950. Her Universal Credit housing element is capped at £950 and she must find the remaining £150 from her standard allowance and earnings. She applies to her council for a Discretionary Housing Payment to cover the gap while she looks for something cheaper.

Common pitfalls. People assume their housing element covers their rent and are shocked when it does not — check the published LHA rate for your BRMA before you sign a tenancy, not afterwards. The under-35 shared accommodation rate catches many people out, and several exemptions are poorly publicised. And service charges included in the rent, such as fuel and meals, are stripped out before the calculation, so the eligible rent may be lower than the figure on your agreement.

How it relates to other terms. LHA sets the ceiling for the housing element of Universal Credit and for Housing Benefit in the private rented sector. The social housing equivalent restriction is the bedroom tax. Total support can be reduced further by the Benefit Cap, and shortfalls can sometimes be bridged by a Discretionary Housing Payment from the council.

What to do next. Look up your BRMA rate before committing to a tenancy, using our Local Housing Allowance guide. If you are already renting with a shortfall, read housing benefit for tenants and apply for a Discretionary Housing Payment straight away, as funds are limited and awarded in year.