The gap between Local Housing Allowance and lower-market rents is forecast to reach a record 23% in October, according to new Resolution Foundation analysis that renews pressure on ministers before the Autumn Budget.
The think tank says the average two-bedroom home at the 30th percentile of rents in England is now £158 a month above the relevant LHA rate. In more than half of broad rental market areas, the shortfall exceeds £100 a month, while Inner East London has a typical gap of £324.
That shortfall can become a collection and arrears risk for landlords who let to households receiving housing support. It does not determine the rent a landlord can charge, but it changes the affordability picture at the point a tenancy is agreed and can leave tenants finding the difference from already stretched income.
Frozen allowance falls further behind local rents
LHA limits the housing-cost support available to 1.9 million private-renting households in Great Britain receiving Universal Credit or Housing Benefit. Rates were relinked to the 30th percentile of local rents in April 2024 but have been frozen in cash terms since then.
Resolution Foundation estimates that, if private rents continue to grow at close to 4% a year, the gap will exceed the March 2024 high in October. It wants the Government to relink the allowance to local 30th-percentile rents in April 2027 and restore annual uprating thereafter.
This follows Residential Landlord’s April report on the arrears risk created by a frozen allowance. The new figures put a specific autumn forecast on a problem that has continued as rents have moved ahead of support.
The report also challenges the argument that an LHA rise would simply be absorbed by landlords through higher rents. Examining the 2024 increase, the foundation estimates that about 10p of every extra £1 of support showed up in higher rents at the bottom of the market over the following two years.
Landlords need clear affordability evidence
That finding should not be read as a guarantee about every local market or every tenancy. Rents are shaped by supply, property condition, location and demand as well as benefit levels. But it weakens the claim that a broad rise in LHA would automatically translate into a matching rent increase.
For landlords, the practical issue is straightforward. A prospective tenant’s income, the confirmed benefit award, a guarantor where appropriate and the rent shortfall should all be considered before a tenancy starts. Relying on an advertised LHA rate without checking the actual gap can create avoidable pressure later.
Residential Landlord’s coverage of council-backed guaranteed-rent leasing has shown why some owners consider alternative routes where local affordability is weak. Those schemes are not suitable for every property, but the growing LHA gap will make reliable payment structures more important in some areas.
Budget decision will shape the next gap
Resolution Foundation puts the cost of relinking LHA and keeping the link in place at £2bn a year by 2029-30. That is a significant fiscal decision, and the Government may take a different view of how much should be met through housing support rather than new social homes.
Yet leaving the allowance unchanged also has a cost. Larger shortfalls make low-rent properties harder to secure for claimants and can increase the chance of failed tenancies. The report says the share of LHA recipients whose rent exceeded their allowance fell after the 2024 reset, despite more households receiving support.
The Resolution Foundation published its analysis of private-renter support on 21 September.
Opinion
Landlords should not be expected to solve an LHA freeze by taking on tenancies that do not add up. But an allowance that persistently trails rents is bad for tenants and makes rent collection less secure for responsible landlords. The Budget should confront that gap with evidence rather than rhetoric about who benefits from an uprating.
