The Resolution Foundation thinktank has released a report highlighting significant housing affordability challenges affecting more than 1.1 million low-income families living in rented accommodations. The organization warns that without policy intervention in the upcoming budget, vulnerable households will face intensifying financial strain.
Local housing allowance, a government benefit supporting low-income renters, has been frozen in cash terms since autumn 2024. During this period, rental costs across the market have continued to rise, creating a growing disparity between benefit levels and actual housing costs. According to the Resolution Foundation’s analysis, a typical low-income family renting a two-bedroom property currently faces an average weekly shortfall of £158 between what they receive in housing support and what their rent actually costs. In certain areas of London, this gap widens dramatically to more than £300 weekly.
The thinktank’s economist indicated that the gap between average rents and allowance levels is projected to reach record proportions in October, potentially increasing to 30 percent by March 2028 if the freeze remains unaddressed. The Resolution Foundation proposes relinking the allowance to actual local rent levels, a change estimated to cost £2 billion annually by the end of the parliamentary term in 2029-30. The organization suggests funding this through adjustments to how universal credit is withdrawn as recipients earn income, framing it as a redistribution toward households with greatest need.
Survey data cited in the report indicates severe hardship among affected households, with one in five unable to maintain adequate home heating and one in eight unable to afford sufficient meals. The government has stated that local housing allowance rates undergo annual review and that future decisions will reflect welfare priorities and fiscal considerations. The budget presentation is scheduled for 28 October, with the government facing competing pressures to deliver cost-of-living relief while managing inflation and interest rate concerns.
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