The Resolution Foundation is calling on the government to commit about £6bn in the next Budget to relink Local Housing Allowance (LHA) to local market rents and restore annual uprating. More than 1.1 million low‑income renters face a growing shortfall between benefits and market rents — projected to hit 23.3% in October (≈£200/month in London, ≈£100 elsewhere) and possibly 30% by early 2028. Resolution argues relinking primarily helps tenants and recommends £2bn a year to close the gap.
Think Tank Urges £6bn Budget Package To Shield Millions Of Renters As LHA Falls Behind Rents
Over 1.1 million low-income tenants are facing a "cost of housing crunch" according to a new report from the Resolution Foundation (Getty/iStock)
The Resolution Foundation is urging the government to commit £6bn in the upcoming Budget to relink Local Housing Allowance (LHA) to local market rents and restore automatic annual adjustments. The think tank warns that more than 1.1 million low-income renters are now trapped in a "cost of housing crunch" as housing support lags behind rapidly rising private rents.
What the report finds
The LHA — designed to cover at least the lowest 30% of local rents — has been frozen since April 2024, while market rents have continued to rise. Resolution’s analysis projects the shortfall between LHA and typical local rents will reach a record 23.3% this October, equivalent to roughly £200 a month for London renters and about £100 a month elsewhere in the UK.
If the freeze remains, researchers warn the gap could grow to 30% by early 2028, increasing the London shortfall to around £260 a month and the UK-wide shortfall to about £130.
John Healey will deliver his first Budget as chancellor in October (Getty)
Human impact and supporting evidence
Independent research cited by the report — from Citizens Advice and Crisis — indicates fewer than 2% of UK properties are now affordable for households dependent on housing benefits. Official data referenced by Resolution show widespread hardship among recipients: in 2024/25, 58% of working-age adults in private tenancies receiving housing support experienced material deprivation; one in five could not keep their homes warm; and one in eight could not afford three meals a day.
Does relinking push rents up?
Addressing concerns that increasing LHA would simply inflate rents, Resolution reviewed the April 2024 relinking and found only 10p of every additional pound of support flowed into higher rents at the bottom of the market. The relinking coincided with an immediate drop of more than 150,000 Universal Credit households struggling with rental shortfalls, the analysis says, suggesting the policy primarily benefited tenants.
Stephen Hunsaker, economist at the Resolution Foundation: "The gap between average rents and LHA levels is set to reach a record high this October. Failing to repeg LHA to actual rents in next month's Budget could lock in another year of shortfalls and push the gap to 30% by 2028. Restoring automatic annual linking would relieve pressure on low-income families in the private rented sector."
Cost and recommendation
Resolution recommends the government allocate about £2bn a year to relink LHA to local market rents and restore automatic annual updates — a policy the think tank estimates would total roughly £6bn by 2029/30.
Responses from charities
Mairi MacRae, Director of Policy and Campaigns at Shelter: "Caught between soaring private rents and the cost-of-living crisis, families should be able to rely on housing benefit as a safety net. With the housing allowance frozen, thousands are forced to choose between feeding their children or paying rent, and tens of thousands remain stuck in temporary accommodation because there is nowhere affordable to move to."
The Independent has contacted the government for comment.
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