'Terrified of a rent increase': How Labour's housing benefit cuts are hitting renters

More than 160,000 private renters on the lowest incomes face rent shortfalls worth up to hundreds or even thousands of pounds a year due to Labour’s housing benefit cuts – with Greater Manchester and the West Midlands particularly badly hit, Big Issue can reveal. 

In both its budgets since taking office two years ago, Labour has frozen the cash value of the local housing allowance (LHA), which caps how much housing benefit is paid to private renters. As rents rise, this cash freeze is effectively a cut.

Tenants whose rent payments are higher than the LHA housing benefit cap have to make up the resulting shortfall themselves. Those whose rent stays below the LHA cap are unaffected. 

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Department for Work and Pensions (DWP) data analysed by Big Issue shows that in May 2024 – a month after LHA rose – 52% of privately renting claimants had their rent fully covered by housing benefit. But in November 2025, the most recent month for which figures are available, just 44% had their rent fully covered, as private rents rose while the housing benefit cap was frozen. 

The number of claimants who had their rent fully covered by housing benefit fell in that time from 974,235 to 823,121, while the number of claimants whose housing benefit was too low to cover their full rent rose from 899,902 to 1,061,881. It means 161,979 more claimants have been left facing a shortfall on their rent due to Labour’s benefit cuts. 

“Caught between an escalating cost of living crisis and sky-rocketing private rents, families should be able to rely on housing benefit as a safety net to help cover costs,” said Sarah Elliott, chief executive of housing charity Shelter. “Yet, with the freeze on local housing allowance limiting the amount of housing benefit families receive, thousands are left desperately grappling to plug the growing gap between their income and rent. 

“More and more families are being forced to make impossible choices daily between feeding their family or paying their rent. Every day our services hear from many who remain terrified that another rent increase will price them out of their homes and push them into homelessness in temporary accommodation, where they can remain stuck for months or even years on end.” 

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The DWP figures include both universal credit claimants and those on the older housing benefit – people have gradually been moving from the latter to universal credit, and by November 2025 around 90% of claimants were on universal credit rather than housing benefit. They are still ‘housing benefit’ claimants, as they receive the housing element of universal credit. 

LHA is set based on the number of bedrooms in a property and the level of local private sector rents. It used to be set in line with the median private rent for a particular sized property in each local area, but early on in the Tory austerity years this was cut to the 30^th percentile of local private rents. 

In other words, housing benefit is meant to fully cover the cheapest 30% of private sector rents for each size of property in each local area. A claimant whose rent is higher than this – for example, those paying the average local rent – must pay the excess themselves.  

But throughout the Tory years in office, the government either increased LHA by less than inflation or froze it altogether while private rents rose, leading to severe real-terms cuts to housing benefit that were only reversed at first during Covid, and then again in 2024 after another freeze.  

“Local housing allowance should be a lifeline, covering the bottom third of local rents – but right now, it simply doesn’t,” said Shelter chief executive Elliott. “The government can and must prevent more families from becoming homeless and help families already in temporary accommodation into a home by immediately unfreezing local housing allowance.”  

The DWP publishes localised data on universal credit housing element claimants, revealing which areas have been worst hit by Labour’s benefit cuts.  

Four areas – Bolton in Greater Manchester, Dudley and Walsall in the West Midlands, and Gosport in Hampshire – saw the share of local universal credit claimants facing rent shortfalls rise 15% between May 2024 and November 2025, the biggest rises across England, Scotland and Wales. In all four areas, tenants facing a rent shortfall went from being a minority of local universal credit claimants to being a majority. 

Seven areas saw a 14% rise – Sandwell and Birmingham in the West Midlands, Rochdale, Oldham and Manchester in Greater Manchester, plus Nottingham and St Albans. 

The data can also be broken down to council ward level, showing the localities that have been worst affected. This includes Smethwick in Sandwell, where the proportion of claimants with a rent shortfall has risen from 30% to 51% – an increase of 107 renters.

In Bloxwich East in Walsall, the proportion of claimants with a rent shortfall has risen from 39% to 63% – which is also a rise of 107 renters. And in South Middleton in Rochdale, the proportion of claimants with a rent shortfall has risen from 13% to 36%.

The LHA freeze also means that tenants whose rents were already above the local housing benefit limit – for example, those paying average local rents – will have seen their existing shortfall get markedly larger. 

Figures published by the government’s Valuation Office Agency (VOA) suggest that tenants paying the 30^th percentile of local market rents in these areas now face rent shortfalls of hundreds or even thousands of pounds a year, when two years ago their rent would have been fully covered. 

For example, a tenant privately renting a room in shared accommodation in Birmingham, paying the 30^th percentile of local shared accommodation rents, would face an annual rent shortfall of £1,613. The shortfall for a Birmingham tenant in a one-bed property would be £1,256, rising to £1,735 in a two-bed property, £1,975 for a three-bed, and £2,394 for a four-bed. These shortfalls would have been fully covered by housing benefit were it not for Labour’s LHA freeze. 

VOA data suggests similarly large shortfalls in other “broad rental market areas” in Greater Manchester and the West Midlands conurbation for tenants paying the 30^th percentile of local private rents.

These shortfalls are, again, entirely due to Labour’s housing benefit freeze. Given that the VOA rental figures were collated in the 12 months up to September 2025, these shortfalls may have increased even further since then.  

Single people under 35 with no children are mostly limited to claiming the local shared accommodation rate of housing benefit, regardless of what size property they are renting. 

A government spokesperson said: “We’re tackling rising rents and the housing shortage with our commitment to build 1.5 million homes – the biggest boost to social and affordable housing in a generation – and our efforts to turn the tide on poverty are making a real difference, as household incomes have risen 5% in real terms and food bank usage has fallen. 

“But we know there is more to do. That is why we have launched the £1 billion crisis and resilience fund, are raising the national living wage by up to £900 a year for a full-time worker, investing more than £1 billion in homelessness services, and are investing a record £39bn in affordable and social housing.” 

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