Labour's choice to freeze local housing allowance will 'condemn thousands to another grim winter'

Chancellor Rachel Reeves has opted to keep local housing allowance (LHA) rates frozen at the autumn budget despite pleas from housing, homelessness and rent campaigners to peg housing benefit to record-high rents.

Local housing allowance determines the maximum amount of support that private renters on university credit or housing benefit can receive to cover their rental costs.

It is supposed to cover the bottom 30th percentile of market rents, but is rarely uplifted to reflect rising record-high rents. The Westminster government has frozen LHA rates in eight of the last 13 years, while rates have only been repegged to market rents in 2020 and 2024.

Reeves decided to continue with the freeze. That was perhaps no surprise – the government’s spending forecasts from the summer assume that LHA will remain frozen in cash terms until at least 2029-30.

But the reality is that people on low incomes with no option but to rent privately face a challenge to find a place to rent, keep up with monthly payments where they live and avoid homelessness.

Tom Darling, director at the Renters’ Reform Coalition, said: “Overall, this is not a renters’ budget – the continued freezing of housing benefit means tenants on low incomes will continue to struggle to keep a roof over their head while paying for the essentials.

“Soaring rents are a major cause of homelessness, driving renters out of their homes or into poverty, and refusing to increase housing allowance means many families will remain trapped in emergency homelessness accommodation, unable to afford to move.”

Sarah Elliott, chief executive of Shelter, said Labour’s decision will “condemn thousands to another grim winter without a secure home”.

However, renters on low incomes will benefit from the chancellor’s decision to scrap the two-child benefit cap.

Ben Twomey, chief executive of Generation Rent said the move will “give families across the country some breathing space”. 

“But the continuing freeze of housing benefit means many renters will still be forced into making heartbreaking choices between heating and eating in order to pay their rent,” he added.

There was also a warning from landlord lobby group the National Residential Landlords Association (NRLA) that the autumn budget may drive up rents beyond the current record highs being experienced in the UK.

Reeves announced that landlords will face a 2% increase on income tax from property income.

Ben Beadle, chief executive of the NRLA, said: “Despite claims of tackling cost of living pressures, the government is pursuing a policy that the Office Budget Responsibility has made clear will drive up rents. 

“Almost one million new homes to rent are needed by 2031. But this budget will clobber tenants with higher costs while doing nothing to improve access to the homes people need.”

Why do local housing allowance rates remain frozen?

Reeves has followed other chancellors in making the political choice to freeze LHA rates.

Jeremy Hunt was the last chancellor to hike rates in 2024 at the cost of £1.2billion to the Treasury.

Reeves’ decision not to do the same saved the government £1.5bn in the last year, according to analysis from the Institute for Fiscal Studies (IFS).

But that decision has come at a great cost for low-income renters at a time.

Since September 2023, the last month that saw LHA rates pegged to rents, the average rent has grown by 19%.

IFS found that gap has reduced the disposable incomes of affected renters by almost £1,500 a year, or by 6%.

If LHA rates remain frozen until the end of the current forecast period in 2029-30, they will be 25% below the 30th percentile level, according to Resolution Foundation. That will amount to a typical shortfall of £180 a month for claimants.

While the rate at which rents are rising has slowed down in recent times, the freeze means low-income families have very few options when it comes to finding a place to live.

In the third quarter of 2025, affordable housing consultancy SimplyPhi found just 1.7% of private rental homes on the market in England were available at LHA rates.

Read more:

• Frozen housing benefit pushes renters into homelessness. Will Labour finally listen and thaw it?
• Labour’s housing benefit freeze will cost low-income renters hundreds of pounds a year
• Labour’s housing benefit freeze leaves almost one million children at risk of poverty

Jed Michael, IFS research economist, said ahead of the budget that the government should commit to setting rents at a fixed percentile of local rents or a share of median local rents and maintain a ‘live link’.

That is opposed to the system where yearly decisions on whether LHA rates will increase come down to political will at the time.

‘Regardless of whether the government wishes to increase support for private renters, calculating support using increasingly historical and irrelevant data on local rents is indefensible. Instead, support should relate to current rents,” said Michael. 

“Depending on the overall level of generosity chosen, the chancellor could make this improvement without spending a penny. This would end the cycle of ad hoc uprating and freezing which creates uncertainty for the public finances and tenants, who currently face a postcode lottery of support across areas.”

Do you know more about this story? Email Big Issue reporter greg.barradale@bigissue.com

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