Approximately 1.1 million low-income families living in rented accommodation are confronting a significant “cost of housing” challenge, with experts urging action ahead of Chancellor John Healey’s first Autumn Budget statement scheduled for October 28.
The Resolution Foundation has highlighted concerns arising from the freeze in local housing allowance (LHA) rates, which have remained unchanged in cash terms since autumn 2024. In their recent report, Saving Private Renters, the thinktank detailed how escalating rents have widened the disparity between LHA payments and actual rental costs.
Currently, low-income families occupying typical two-bedroom flats are experiencing an average weekly shortfall of £158 between their housing support and rent, with some London areas witnessing gaps exceeding £300 per week.
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Stephen Hunsaker, an economist at the Resolution Foundation, emphasised the urgency of the situation: “By this October, the difference between average rents and LHA levels is set to hit a record high. Without adjusting LHA to mirror actual rent increases in next month’s budget, the freeze risks extending for another year, potentially causing the gap to swell to 30% by March 2028.”
He further noted the hardships faced by tenants: “Many receiving housing support are already sacrificing essential needs to cover rent. The government should reinstate the automatic annual linking of LHA to help alleviate the financial strain on low-income families renting privately.”
Implementing such a relinking of LHA to prevailing rents is projected to cost £2 billion annually by the close of this parliamentary term in 2029-30. To fund this adjustment, the Resolution Foundation proposes modifying the “taper rate” - the percentage at which Universal Credit (the most prevalent benefit administered by the Department for Work and Pensions, or DWP) decreases as claimants' earnings rise.
A spokesperson for the Labour Party stated: “Local housing allowance rates undergo yearly reviews, and upcoming decisions will reflect the government’s welfare priorities within the current fiscal context.”