More than 1.1 million low‑income families living in privately rented homes are bracing for a worsening “cost of housing” crunch, the Resolution Foundation warns. Its latest analysis shows that the average gap between what Local Housing Allowance (LHA) covers and actual market rent has risen to £158 a week for a typical two‑bedroom household, climbing above £300 a week in parts of London. With the allowance frozen in cash terms since autumn 2024, the thinktank urges the Chancellor to end the freeze in the upcoming budget and restore automatic annual uprating of LHA to market rents.
The widening rent gap
The Resolution Foundation’s report, Saving Private Renters, calculates that a low‑income family renting a typical two‑bedroom flat now faces an average weekly shortfall of £158 between LHA payments and the rent they must pay. In London’s highest‑priced boroughs the disparity exceeds £300 a week. The thinktank attributes the gap to nine years of cash‑freeze on LHA out of the last fourteen, during which market rents have continued to climb while the allowance has remained static.
Stephen Hunsaker, an economist at the Resolution Foundation, said:
> “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% by March 2028.”
He added that many tenants already skip essentials to meet rent, and that reinstating the automatic link would ease pressure on the poorest renters in the private sector.
Policy proposals and funding
To close the gap, the Resolution Foundation calls for a “double lock” – a cap on private rents in England tied to both inflation and earnings growth – alongside the restoration of LHA’s annual uprating. The thinktank estimates that re‑linking LHA to market rents would cost roughly £2 billion a year by the end of the current parliament in 2029‑30.
It proposes financing this expense by increasing the taper rate at which Universal Credit is withdrawn as claimants’ earnings rise, effectively redirecting more support within the UC system toward those with the greatest need. The analysis notes that historically, 90p of every extra pound allocated to LHA has ended up in tenants’ pockets rather than being absorbed by landlords through higher rents.
Survey evidence cited in the report underscores the human toll: one in five working‑age adults in families receiving housing support in private rentals say they cannot afford to keep their homes warm, and one in eight report they cannot afford three meals a day.
Historical context and political pressure
When LHA was introduced in 2008 it was set at the median level of local rents. In 2011 the threshold was lowered to the 30th percentile, and since then the allowance has been frozen for nine of the past fourteen years. A coalition of charities – including Crisis, the Joseph Rowntree Foundation and Citizens Advice – has repeatedly called for the link to be reinstated.
The Chancellor is due to present the budget on 28 October, under pressure to deliver on Labour’s pledge of giving voters a “breathing space” amid rising costs. Yet he faces constraints from persistent inflation and higher interest rates. A government spokesperson responded:
> “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.”
Why it Matters
If the LHA freeze continues, the shortfall between assistance and actual rent will keep widening, pushing more low‑income households into impossible choices between heating, food and shelter. The Resolution Foundation’s projections show the gap could hit 30% of rent by early 2028, effectively eroding the safety net that housing benefit is meant to provide. Restoring the automatic link – funded through a modest adjustment to Universal Credit’s taper – would not only relieve immediate hardship for over a million families but also stabilise the private rental market by ensuring that support reaches tenants rather than inflating landlords’ profits. With the budget looming, the Chancellor’s decision will determine whether the UK deepens its housing crisis or begins to rebuild a more equitable safety net for those on the lowest incomes.
