More than 1.1 million low-income families in rented homes face a “cost of housing” crunch without action in next month’s budget, the Resolution Foundation thinktank has warned. Local Housing Allowance (LHA) has been frozen in cash terms since autumn 2024.
A new report by the thinktank, titled 'Saving Private Renters', found that rising rents have created a widening gap between what families claiming LHA can afford and market realities. A low-income family renting a typical two-bedroom flat now faces an average shortfall of £158 a week, which can exceed £300 a week in parts of London.
Resolution Foundation economist Stephen Hunsaker stated that the gap between average rents and LHA levels is projected to reach a record high this October. He added that failing to repeg LHA to actual rents in the upcoming budget could extend the freeze for another year, potentially leading to a 30% gap by March 2028.
The thinktank suggests that restoring the automatic annual linking of LHA to rents would cost £2bn a year by the end of this parliament in 2029-30. They propose funding this by increasing the “taper rate” at which universal credit is withdrawn as recipients’ income rises, arguing this would transfer funds within the Universal Credit system towards those with the most need.
A government spokesperson said that Local Housing Allowance rates are reviewed annually, and future decisions will consider the government’s welfare priorities and the fiscal context. The chancellor is scheduled to present his budget on 28 October.