Rent crisis will keep breaking new records without action, Labour warned
Rapid rent increases combined with frozen housing benefits will push more people into crisis if Labor fails to act, a new report has warned.
Findings from the Effective Solutions Foundation show that the affordability gap between rent prices and support for low-income tenants will reach a record high of 17 per cent next year. This represents an average shortfall of £104 per month (or just over £1,200 per year) as households face increasing debt or homelessness.
The think tank adds that if action is not taken, this figure will reach 25 per cent by 2029-2030, meaning a deficit of an average of £180 per month.
The local housing allowance, which determines housing benefit rates, has been frozen by the Labor government until at least 2026, following a brief freeze in April 2024. This is the formula that determines how much funding the Department for Work and Pensions (DWP) will give to each council to administer housing benefit, increasing it to cover at least 30 per cent of rents in the area that year.
The one-off increase announced by the previous Conservative administration means housing support is now tied to private rent levels from September 2023. Average rents have already increased by 14 percent during this time.
Unlike many benefits, which are usually increased each year with inflation, housing benefit rates have also only been adjusted twice in the last decade, in 2020 and 2024.
The Solution Foundation report warns that this has a major impact on living standards; More and more households are being forced out of the private rental sector and into temporary accommodation.
The number of children living in these emergency settings continues to reach record levels, reaching 172,420 at the end of June, according to the latest data from the Office for National Statistics.
According to the report, this acute crisis has also forced cash-strapped municipalities to manage an ever-increasing bill; The bill for temporary accommodation reached £2.8bn last year – double the annual cost a decade ago.
The think tank, which found that freezing aid would cost £2.5bn, argues that continuing the freeze to achieve “short-term savings” for the government is “false economics”.
Hannah Aldridge, senior research and policy analyst at the Resolution Foundation, said: [September 2023] It has created an alarming affordability gap for almost two million low-income families. Without government intervention in the budget, freezing support will be a major dent in families’ living standards.
“With the gap between local housing benefit rates and the 30th quintile of rent expected to exceed the previous record of 17% next year and on track to reach 25% by the end of parliament, the government needs to re-link housing support to local rents.”
The report’s author also notes that although the funding gap is most pronounced in London, with an average deficit of £350 in Hackney, there is not a single area in England that does not have a local authority with an average deficit of at least £100.
Francesca Albanese, Crisis’s chief executive of policy and social change, said: “This latest report from the Resolution Foundation reveals just how damaging the local housing benefit freeze has become.
“We are already seeing record numbers of families trapped in temporary accommodation. But with the freeze continuing until the end of this parliament, the gap between housing benefit and private rent will grow even wider. We cannot sit by as more families are pushed to breaking point, struggling to keep a roof over their heads and meet basic needs such as food and heating.
“We must see ministers tackle housing benefit in the autumn budget to keep people out of poverty. It’s time to end the harmful cycle of giving with one hand and taking with the other, and enabling families to stay in their homes rather than being forced into homelessness.”
A government spokesman said: “We are struggling with the impact of rising rents and housing shortages on our commitment to build 1.5 million homes, including the biggest increase in social and affordable housing in a generation.
“We are also putting more money in people’s pockets by increasing benefits, making universal credit cuts fairer and helping people move out of poverty and into good, secure jobs as part of our Plan for Change.”
