Bad news for 1.1 million renters in the UK

The gap between rents and housing support for 1.1 million low-income renters will hit a record high in October, the Resolution Foundation said on Saturday (19 September).

The think tank’s report, Saving Private Renters, found the shortfall between Local Housing Allowance (LHA) and typical rents at the cheaper end of local markets has grown sharply as housing costs have climbed.

LHA sets the maximum help private renters on Universal Credit or Housing Benefit can receive towards rent in each of Great Britain’s 192 Broad Rental Market Areas.

The government last linked LHA rates to actual rents in April 2024 and has frozen them since, so the gap widens every time rents rise.

The Foundation expects that gap to reach a record 23.3% in October, and it warned the figure could hit 30% by March 2028 if the Chancellor leaves the freeze in place at next month’s Budget.

Low-income families renting a two-bedroom home in Inner East London face a typical monthly shortfall of £324, and the gap runs to at least £200 a month across the rest of the capital.

The shortfall now exceeds £100 a month in more than half of all areas in England.

The report also tested the argument that raising LHA hands the money to landlords, who lift rents to match the extra support.

Its analysis of the April 2024 uplift found only 10p of every extra pound of support showed up as higher rents at the bottom of the market.

That matches an earlier study of the 2011 LHA cut, which found tenants absorbed 90% of the reduction, with around a tenth appearing as lower rents.

The 2024 increase also cut the number of Universal Credit households in England facing a gap between housing support and rent by just over 150,000.

In 2024-25, 58% of working-age adults in private renting families on housing support were in material deprivation. One in five could not afford to keep their home warm and one in eight could not afford three meals a day.

The Foundation said tenants already going without essentials would most likely use any uplift to cover those costs before looking for more expensive housing.

It called on the government to relink LHA to local rents in the Budget and restore automatic annual uprating, at a cost of £2 billion a year by 2029-30.

The think tank said the Treasury could fund the change from within the Universal Credit budget, including by lowering the taper rate.

“The gap between average rents and Local Housing Allowance levels is set to reach a record high this October, and failing to repeg 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,” said Stephen Hunsaker, economist at the Resolution Foundation.

“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,” he added.

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