Think tank warns over 1 million low-income UK renters face growing housing shortfall

The Resolution Foundation think tank has warned that more than 1.1 million low-income families renting homes in Britain face a worsening housing affordability crisis unless Housing Secretary John Healey takes action in next month's budget.

At the heart of the issue is Local Housing Allowance (LHA), which has been frozen in cash terms since autumn 2024 even as rents keep climbing. According to the think tank's new report, Saving Private Renters, a low-income family renting a typical two-bedroom flat now faces an average weekly shortfall of £158 between what LHA covers and actual rent costs. In parts of London, that gap exceeds £300 a week.

The think tank pushed back on claims that relinking LHA to local rent levels would mainly benefit landlords by pushing rents higher. Its analysis of past LHA adjustments found that 90p of every £1 tends to go to tenants rather than being absorbed into rent increases.

Resolution Foundation economist Stephen Hunsaker said the gap between average rents and LHA levels is on track to hit a record high this October, and warned that failing to repeg the allowance to actual rents in the upcoming budget could extend the freeze for another year, with the gap potentially reaching 30% by March 2028.

Restoring the link between LHA and rents would cost around £2bn a year by 2029-30. The think tank proposes funding this by raising the "taper rate" — the rate at which universal credit is withdrawn as claimants' earnings rise — describing it as a redistribution within the universal credit system toward those with the greatest need.

Survey data cited in the report found that one in five working-age adults in households receiving housing support in the private rental sector cannot afford to heat their homes, and one in eight cannot afford three meals a day.

LHA was originally introduced in 2008 pegged to the median level of local rents, before being reduced in 2011 to the 30th percentile. It has been frozen for nine of the past 14 years. Charities including Crisis, the Joseph Rowntree Foundation and Citizens Advice have called for the link to be restored.

The chancellor is due to present the budget on 28 October. A government spokesperson said LHA rates are reviewed annually and that future decisions will reflect the government's welfare priorities and the fiscal context.