Housing Shortfall Hits 1.1 Million Families

More than 1.1 million low-income families face a housing cost crunch. The Resolution Foundation warns that inaction in the October budget will widen the gap. Local housing allowance rates have been frozen in cash terms since autumn 2024. Market rents have continued to rise during this period. The result is a structural deficit for tenants relying on state support.

A typical two-bedroom rental now carries an average shortfall of £158 per week. In parts of London, this deficit exceeds £300 per week. The thinktank projects the gap between rents and allowances will reach a record high this October. Without adjustment, the discrepancy could hit 30% by March 2028. This trajectory locks in a multi-year freeze for affected households.

Allowance freeze drives record gap

Local housing allowance was originally pegged to median local rents in 2008. The benchmark shifted to the 30th percentile in 2011. The rate has remained static for nine of the past 14 years. Stephen Hunsaker, an economist at the Resolution Foundation, notes that failing to re-link allowances to actual rents exacerbates the squeeze. He argues that the current policy forces tenants to sacrifice essentials to meet rent payments.

Survey data cited in the report shows one in five working-age adults in supported households cannot keep their homes warm. One in eight cannot afford three meals a day. These figures highlight the immediate impact of the allowance freeze. The financial pressure extends beyond rent to basic living costs. The disparity is most acute in high-cost urban areas.

Funding mechanism targets universal credit

Relinking allowances to rents would cost £2bn annually by 2029-30. The Resolution Foundation proposes funding this through an increase in the universal credit taper rate. This adjustment would reduce the rate at which benefits are withdrawn as income rises. The change represents a transfer within the universal credit system. It directs resources toward claimants with the highest needs.

Analysis of past allowance changes indicates that 90p of every £1 in increased support goes to tenants. The remaining 10p affects market prices. This evidence counters arguments that higher allowances primarily benefit landlords. The Resolution Foundation states that the policy would relieve pressure on the private rented sector. It aims to stabilize housing costs for the most vulnerable groups.

Budget decision comes under scrutiny

The chancellor presents the budget on 28 October. Labour has promised voters a breathing space amid rising costs. However, rising inflation and interest rates constrain fiscal options. A government spokesperson stated that future decisions will reflect welfare priorities and the fiscal context. Charities including Crisis and Citizens Advice have called for the restoration of the rent link. The political pressure to address the housing shortfall remains high.