‘Cost of housing’ crunch looms for low-income families, warns Resolution Foundation

More than 1.1 million low‑income families renting privately are facing a severe “cost of housing” crunch because the Local Housing Allowance (LHA) has been frozen in cash terms since autumn 2024. The Resolution Foundation’s new report, Saving Private Renters, finds that a typical two‑bedroom household now experiences an average shortfall of £158 a week, climbing to over £300 in parts of London, as rents continue to outpace the frozen allowance. The think‑tank warns that without a repeal of the freeze in the upcoming budget, the gap could widen to 30 % by March 2028, leaving many tenants unable to meet basic needs.

The foundation argues that relinking LHA to actual rents would not simply enrich private landlords; historical analysis shows that about 90 p of every £1 increase in LHA tends to benefit tenants rather than inflating rents. To fund the estimated £2 billion annual cost of restoring the automatic rent linkage by 2029‑30, the report proposes raising the taper rate at which Universal Credit is withdrawn as earnings rise, effectively reallocating resources within the existing welfare system toward those most in need. Survey data cited by the think‑tank reveal that one in five working‑age adults receiving housing support cannot afford to keep their homes warm, and one in eight cannot afford three meals a day, underscoring the dire consequences of the current policy.

Charities and campaign groups, including Crisis, the Joseph Rowntree Foundation and Citizens Advice, have joined the call for an immediate restoration of the rent link, echoing Labour’s pledge to give voters “breathing space” amid rising living costs. The chancellor, John Healey, is set to deliver his budget on 28 October and faces pressure to act, though he is likely to cite inflation and interest‑rate concerns as constraints. A government spokesperson reiterated that LHA rates are reviewed annually and future decisions will be made in line with broader welfare priorities and fiscal context, leaving the final outcome uncertain.

⚡ Effects Interpreter