Chancellor John Healey urged to finish housing profit freeze hitting low-income households at Budget
The Resolution Foundation warns more than 1.1million are facing a ‘cost-of-housing crunch’ as the gap between local rents and benefit support people can claim is set to reach a record high this autumn
Chancellor John Healey will deliver the Budget on October 28(Image: Thomas Krych/ZUMA Press Wire/Shutterstock)
Chancellor John Healey is being urged to end a freeze on housing benefit at next month’s Budget to help struggling low-income private renters.
The Resolution Foundation think-tank warns today more than 1.1million are facing a ‘cost-of-housing crunch’ as the gap between local rents and benefit support people can claim is set to reach a record high this autumn. The research shows the gap in London is the widest, with a low-income family renting a two-bedroom home in inner-east London facing a typical shortfall of £324-per-month.
Across the rest of the capital, the shortfall is at least £200, and exceeds £100 each month in more than half of all areas in England, the Resolution Foundation adds. Local housing allowance (LHA) rates, which control the maximum amount of rental support people on Universal Credit can get, have been frozen for most of the past decade.
Unfreezing the rates and linking them to local rents would cost an estimated £2billion by 2029-30. But charities have previously argued the freeze on LHA rates has pushed cash-strapped families – already struggling with the cost of energy and food – into homelessness.
New Prime Minister Andy Burnham also criticised the freeze – first introduced by the Tories – in a major speech before he replaced Keir Starmer in Downing Street. Mr Burnham, who has promised a massive expansion in council homes, said in June the country was in a housing trap where “we are forced to chase rents in the private-rented sector through the benefits system”.
He added: “When governments try to control these costs by freezing Local Housing Allowance, it makes families homeless and places unfunded pressures on councils when they have to pay for temporary accommodation.”
Economist at the Resolution Foundation Stephen Hunsaker said: “The gap between average rents and Local Housing Allowance levels is set to reach a record high this October, and failing to re-peg LHA to actual rents in next month’s Budget could lock in a freeze for another year, and see the gap reach 30 per cent by March 2028.
“Rather than primarily benefitting landlords, our new analysis shows that the last time LHA was re-pegged to local rents in April 2024 it was tenants that benefited, with the fraction of LHA recipients facing a shortfall between their rents and the amount they could claim dropping significantly.”
He added: “With many tenants receiving housing support already going without essentials to pay their rent today, the Government should restore the automatic annual linking of LHA to relieve the pressure on low-income families in the private rented sector.”
Mairi MacRae, Director of Policy and Campaigns at Shelter, also told The Mirror : “Caught between an escalating cost-of-living crisis and skyrocketing private rents, families should be able to rely on housing benefit as a safety net to help cover costs. Yet with the freeze on housing allowance, thousands are left desperately grappling to plug the gap between their income and rent.
“Families are being forced to make impossible choices daily between feeding their family or paying their rent. Tens of thousands are stuck homeless in grim temporary accommodation for months or even years on end because there’s nowhere affordable for them to move to.
“The government must prevent more families from becoming homeless and help those already in temporary accommodation move into a home by unfreezing local housing allowance in the Autumn Budget, so it covers at least bottom third of local rents. The only long-term solution to provide families with a safe and secure home is for the government to deliver the social rent homes we desperately need.”
A Government spokesperson said: “Local Housing Allowance rates are reviewed annually,and future decisions will be taken in the context of the Government’s welfare priorities, and the fiscal context.
“We know there is more to do. That is why we have launched the £1 billion Crisis and Resilience Fund, are raising the National Living Wage by up to £900 a year for a full-time worker, investing more than £1 billion in homelessness services, and are investing a record £39 billion in affordable and social housing.”
