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Social Housing Speed Read – Alternative to the Local Housing Allowance Cap

In September 2016 we looked at the impact of comments from the Department of Work and Pensions ('DWP') relating to the impending application of the Local Housing Allowance ('LHA') cap and the scope of tenants that will be affected. A pilot alternative to the LHA cap has now recently been announced.

Current proposals

The anticipated introduction of the LHA cap is a huge cause for concern in the sector and since the announcements many Registered Providers have serious reservations about their viability going forward.

The new system for Housing Associations is currently planned to come into force in 2019. Under the current proposals, the LHA cap will be applied to all claims, including supported and sheltered housing, with a top up paid by the local authority.

It has been argued by Registered Providers that this system would cause uncertainty leading to a stall in developments. Many have stated that they will not spend government funding earmarked for supported housing schemes unless more certainty is given over the LHA cap with some stating that they have inserted clauses into grant bids that they will not use it without such certainty.

Three specialist housing providers (Anchor, Hanover and Housing and Care 21) have warned that the proposals lead to a £64 million annual shortfall in their joint response to the government’s consultation on supported housing funding.

Proposed alternative

The Greater Manchester Housing Providers (GMHP), a group of 26 social landlords, has responded to a government consultation on the proposed LHA cap. Instead of LHA, the GMHP has proposed using a national rate to set rents in supported housing, to be calculated on typical costs of running schemes.

It is considered that this would make Registered Providers based in low-rent areas less reliant on top-ups by the local authority and in turn would reflect more accurately the cost of supported housing.


With support from the National Housing Federation, GMHP has offered to act as a regional pilot for the initiative. The Group believes using the LHA rate is “fundamentally flawed” and would result in a “postcode lottery” with lower rent areas being much more dependent on top-ups than others. As a result, there is concern this would lead to shortages in supported housing as Registered Providers would wish to avoid the risk of building such schemes.

Discussions around the pilot are ongoing. At present it is not clear what the remit of the pilot is or when we can expect its conclusions.

Next steps

The GMHP proposals are just one of many alternatives. The National Housing Federation believes the Government should change its proposals so the benefits system pays at a higher level than the LHA rate for both supported and sheltered housing. Anchor, Hanover and Housing and Care 21 believe sheltered housing should be exempt from the proposals, or if not delayed until 2022 in line with the full roll-out of universal credit.

The Department for Communities and Local Government have advised they are carefully considering the consultation responses and will be publishing a Green Paper on this in due course.

It is clear this is a live issue and one in which its development should be carefully monitored – there will no doubt be much discussion and consultation ahead of its implementation.

If you have any questions on the above and how it will affect social housing providers, or any other questions as a social housing provider, please do not hesitate to contact John Murray or a member of our expert Social Housing Team.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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