Rachel Reeves is under pressure to boost housing benefit in the Budget, with experts warning that renters in England are being “pushed to the cliff edge”.
The cost of private renting has soared above inflation, but the rate of housing benefit for people on low incomes has been frozen for four of the last five years.
A group of 40 housing organisations have submitted an open letter to the Government, calling for the benefit to be increased. The Mayor of London has backed their calls and supports boosting the payment.
The average private rent in the UK increased by 5.7 per cent between August 2024 and August 2025, according to the Office for National Statistics (ONS), while the overall rate of consumer inflation is 4.1 per cent.
Despite this, the amount of housing benefit that people can claim to pay their private rent has not risen in line with rent inflation. Although the rate was increased by the Conservatives in 2020 and again in 2024, it has largely been frozen since 2016.
People who rely on the payment for their rent are being forced into poverty and homelessness, charities have said.
Just 2.7 per cent of private rental listings in Britain are affordable for people who receive housing benefit, according to Crisis. This is down from 12 per cent in 2021-22.
Some households in England are being forced to find an additional £429 a month for a three-bed home due to the gap between housing benefit and their rent, according to the charity. Around 2 million people receive the payment – a significant number of whom are in work but on low incomes.
The rate is set by the Department for Work and Pensions (DWP) and the Treasury.
The i Paper understands that officials at the DWP are aware of the problems faced by people on housing benefit trying to pay their rent.
But boosting it at the next Budget would be expensive for the Government at a time when it is considering how to fill the black hole in public finances.
170,000 children in temporary accommodation
Around 170,000 homeless children are currently living in temporary accommodation in England, according to the latest Government figures. Homelessness, including rough sleeping, is rising – which Crisis warns is linked to unaffordable rents.
Temporary accommodation, such as hotels, converted office blocks and shipping containers, is often unsuitable for people’s needs. The i Paper previously revealed that 34 children had died unexpectedly in temporary housing.
It is also expensive, with councils in England spending more than £2.7bn on temporary accommodation placements last year alone (excluding admin costs). This is up 26 per cent on 2023-24.
The Chancellor has committed to allocating £39bn to the affordable homes programme (AHP) from 2026 to 2036 and is rumoured to be gearing up to announce the end of the two-child benefit limit in her November Budget. However, she is not currently thought to be considering a housing benefit boost.
In the open letter, shared with The i Paper, a coalition of organisations including Crisis, the National Residential Landlords Association (NRLA) and the Chartered Institute of Housing (CIH), urged Reeves to boost housing benefit.
They want the Government to restore local housing allowance (LHA) rates to cover at least the cheapest 30 per cent of rents. LHA is the mechanism used to calculate housing benefit in any given area by offering people support which covers the rent in the cheapest available properties.
However, because rents have risen, fewer properties are now available to people who rely on the benefit which, Crisis says, is pushing people into homelessness, rent arrears and temporary accommodation.
In the letter, the organisations cite research from the independent think-tank, the Resolution Foundation, which has found that boosting housing benefit would lift 75,000 children and 125,000 adults across the UK out of poverty.
While the group welcomed the Government’s recently announced £84m fund for people facing homelessness, it said that without a housing benefit boost, “the UK Government risks failing in its efforts to tackle the housing crisis and councils will be forced to keep spending billions of pounds each year on poor quality temporary accommodation”.
There is a risk that £84m will not touch the sides. In London, councils are currently spending more than £5m a day on temporary accommodation to house homeless people.
‘A zero-sum game’
Sadiq Khan and his deputy mayor for housing and residential development, Tom Copley, have also backed the letter.
Copley told The i Paper: “The Mayor and I have consistently said that the Local Housing Allowance (LHA) is not keeping pace with rising rents in London. We support calls for LHA to be reviewed in the forthcoming Budget and continue to work closely with Government to secure additional funding for affordable housing in the capital.”
Paul Dennett, the deputy mayor of Greater Manchester, added: “We have consistently campaigned for the rate of Local Housing Allowance to reflect the true cost of renting in today’s housing market, recognising that we cannot consider the housing and homelessness crisis in isolation.”
Dennett described the housing benefit freeze as “a zero-sum game” which puts pressure on families and local councils.
“Last year, we estimate that Greater Manchester local authorities spent at least £75m on temporary accommodation to support approximately 6,000 households, many of whom had been evicted from an increasingly precarious and unaffordable rental market,” he added.
Florence Eshalomi, the Labour MP for Vauxhall and Camberwell Green and chair of the housing select committee, described the situation as “shameful”.
“Our committee heard compelling evidence that the decision to re-freeze LHA rates will leave families unable to afford private sector rents and places them at risk of homelessness.
“This is a false economy that increases temporary accommodation costs for councils and undermines the additional funding for homelessness services.”
Eshalomi urged the Chancellor to “look again” at the “impact that freezing LHA is having on homelessness services and families struggling to make ends meet.”
The Ministry of Housing, Communities & Local Government and the Treasury were contacted for comment.
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