Housing Benefit freeze and Local Housing Allowance rate 2025

New analysis from the Institute for Public Policy Research (IPPR) reveals that changes to housing benefits, in particular Local Housing Allowance (LHA), has led to an increase in child poverty.

There are now an estimated 440,000 households with children whose housing support no longer covers the costs of their rent. As the government has not committed to raising LHA rates next month, the number of households affected is expected to rise by an additional 90,000 families by March 2026.

This would leave an estimated 925,000 children affected by housing support shortfalls.

As rents rise whilst support is frozen, households will need to find the money to pay their rent from other sources – leaving families worse off overall despite benefit uprating come April in other areas.

This is a growing concern as the number of children in the private rental sector has grown from one in 12 to one in five over the last 20 years.

Housing benefits have not automatically reflected rent rises for more than a decade, with the Conservatives freezing it for seven for the last 12 years. IPPR has highlighted that much of this problem began with the 2011 decision to reduce LHA rates from the 50th percentile (so the mid-point of rents in each area) to the 30th percentile, alongside the number of freezes. 

Henry Parkes, principal economist at IPPR and author of the report, says: “A safe, secure, and affordable home should be the foundation for every child’s future.

“Instead, too many families are trapped in a cycle of poverty and instability caused by unaffordable rents and insecure tenancies. Housing reform isn’t just a moral imperative—it’s an economic necessity.”

What is Housing Benefit and LHA?

Previously, Housing Benefit was an umbrella term that covered the payments to people on qualifying benefits to cover their rent. It has now largely been replaced by Universal Credit (only pensioners can now apply directly for Housing Benefit).

Payments are divided into two main types – those who rent social housing and those have private landlords. 

Housing benefits paid to people who live in council or social housing and have a spare bedroom are reduced for any ‘spare’ bedrooms – 14% of the ‘eligible rent’ for 1 spare bedroom, and 25% of the ‘eligible rent’ for 2 or more spare bedrooms.

This was dubbed ‘the bedroom tax’ when it was brought in, and many are still struggling to make up the shortfall. 

Claimants are only entitled to an amount that’s set based on the family’s size and characteristics – children of the same sex or aged under 10 are expected to share a bedroom.

Social housing makes sure a family’s housing benefit, or housing support element of Universal Credit, will meet their entire housing costs, as well as guaranteeing a home for life.

For tenants who rent privately, their housing amount is either their Local Housing Allowance (LHA) rate or their actual rent, whichever is lower. The LHA rate is based on where they live and their household size.

Single people aged under 35 with no dependants only get a rate that reflects a room in a shared house, rather than a one-bedroom property. 

Housing benefit rates used to be linked to the cost of rents in different areas, , and went up annually, but this ended under the Tory-Lib Dem coalition.

Rates have been frozen in seven different years since then, including the latest freeze period between 2020 and 2024.

The last government did increase the rates for the current year, fixing rates to meet the cheapest 30% of properties in an area. These payments were also subject to a nationwide cap.

The postcode lottery  of LHA rates

The report also identified a concerning postcode lottery with LHA rates. Over half (62 per cent) of families renting privately in Wales face a shortfall, while only a third (31 per cent) of those in Scotland do. The variation between local authorities is even more stark, with 74 per cent of claimants facing a shortfall in Neath Port Talbot, compared to just 9 per cent in East Lothian.

It also highlights a lack of social housing since right-to-buy was introduced in 1979. Waiting lists for social housing have now reached a 10-year high of 1.33 million.

Payments will not keep track of spiralling rent prices in many areas, meaning claimants whose rent goes up will see shortfalls and may face eviction if they are unable to pay.

Housing charities have said that many claimants will be unable to cover rising rent costs.

Polly Neate, chief executive of Shelter, says: “The consequences of our dire shortage of genuinely affordable social homes are devastating. With private rents soaring and Housing Benefit frozen, thousands of families are being pushed to breaking point—forced to scrape together money they don’t have or lose the roof over their heads.

“Our broken housing system has left 164,000 children growing up homeless in England. Families are stuck for months and even years in overcrowded, unfit, and eye-wateringly expensive temporary accommodation that keeps them trapped in poverty and often stops parents from being able to work.”

Landlords ‘all the costs have gone up’

Many landlords are also struggling with Housing Benefits not keeping pace with inflation, as lettings expert Sarah Dawood, known as The Female Landlord, explains: “There is a crisis in private rentals that is only being made worse by the real-terms cut in housing benefits,” she says. “I have six properties that I let out, and each time one comes up I might get 100 people asking. The messages people send are heartbreaking. No-one should be in the position where they are that desperate for a home, and I’m aware for every person I say yes to, there’s 99 more.”

Sarah, like many landlords, is having to face the pressures of rising rates on buy-to-let mortgages.

“In April, one of my properties is going from a mortgage of about £1300 a month to – if I let it go to the variable rate – £4000 a month. Best deal I can get is more like £2500 a month, but that’s still double the cost. So I’m looking to have to sell that one, and maybe buy something more affordable. 

“Then the insurance is going up, repairs are rocketing, all the costs have gone up, and I need to keep the properties to a good standard, so the money has to come from somewhere, and that means rent increases.

“I’ve got some really great tenants, and I do have some really open conversations with them, and say, ‘this is what I’m facing’. I have to signpost them back to the Housing Benefit office, and explain, they need to take their new tenancy agreement back to them, showing them the rent has gone up. I try and help them, but it’s a difficult.”

Sarah says that as well as demand, there’s a huge issue with shortfall in LHA versus market rents. 

“Just as a recent example, I had a house that I was renting out for £2300 per calendar month, in Dagenham, in the outskirts of London,” she says. “The tenants coming in were in receipt of disability benefits, Child Benefit, child tax credits and they had been in temporary accommodation, but the LHA they are entitled to is around £1495. That’s a big shortfall.

“The current system just isn’t sustainable, for tenants or landlords. Something needs to change.”

Families are going without food to top up their rent

The Joseph Rowntree Foundation suggesting that private renters on housing benefits will be around £700 worse off per year, or £887 per year for a working-age couple with children.

It estimates that 50,000 renters will be pulled into poverty and that 81% of low-income private renting households in receipt of housing benefits are going without essentials like food, heating and warm clothing, and around 6 in 10 (59%) are in arrears with at least one household bill.