Millions of private renters receiving state support will see a crucial benefit frozen for the coming year, even as other Department for Work and Pensions (DWP) payments increase from April. The Local Housing Allowance (LHA), which determines the maximum housing benefit for those on Universal Credit, will remain at its current rate until at least April 2026.
The LHA Freeze Explained
This decision creates a stark contrast with other benefits, which are set to rise with inflation. The LHA rates were last increased in 2024 but will now be held static for the 2025/26 and 2026/27 financial years. LHA is designed to cover the cost of renting the cheapest 30% of homes in any given area, aiming to prevent homelessness and make the private rental market accessible to low-income households.
Critically, housing benefit does not automatically rise in line with market rents. A freeze means the financial help claimants can receive stays the same while rental costs continue to climb nationwide. The Institute for Fiscal Studies (IFS) has highlighted the severe consequences of this policy.
Mounting Financial Pressure on Renters
New research from the IFS reveals the scale of the shortfall facing families. The analysis shows that freezing LHA rates in 2025/26 will leave the average renter in a three-bedroom property with a weekly gap of £43 between their support and their rent. This adds up to an annual deficit of £2,214.
Over a longer period, the gap becomes even more dramatic. The IFS notes that since September 2023—the period on which current LHA rates are based—UK rents have grown by approximately 19%. The failure to uprate LHA in line with this surge has resulted in significant losses for the more than one million households whose rent exceeds the current LHA rates.
The institute stated: “Privately renting households are already a particularly poor group, with a relative poverty rate of 37%, compared with 21% among the whole population.”
Impact on Living Standards and Disposable Income
The real-terms cut to housing support is having a measurable effect on household budgets. According to the IFS, the freeze reduces the disposable income of affected households—after deducting housing costs—by an average of 6%. For those in the poorest fifth of the population, the impact is double, with a 12% reduction in disposable income.
This policy effectively widens the inequality gap for a group already facing financial hardship. With rents projected to continue rising, the fixed LHA rate will cover a shrinking proportion of actual housing costs, forcing families to divert money from essentials like food, heating, and clothing to keep a roof over their heads.
The DWP's approach of increasing most benefits while holding the Local Housing Allowance steady creates a specific vulnerability for private renters reliant on Universal Credit. The freeze locks in support at a level that is rapidly becoming disconnected from the reality of the UK's rental market, posing a direct challenge to the benefit's core goal of preventing homelessness.
