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Resolution Foundation warns of ‘cost of housing’ crunch for 1.1 million low-income families

Thinktank urges chancellor to reverse local housing allowance freeze before next month’s budget

By LineZotpaper
Published
Read Time1 min
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More than 1.1 million low-income families in rented homes face a “cost of housing” crunch unless the government acts in next month’s budget, the Resolution Foundation thinktank has warned, as the local housing allowance remains frozen.

The Resolution Foundation has issued a stark warning that over 1.1 million low-income households in the private rented sector are facing a looming “cost of housing” crisis. In a report published ahead of the chancellor’s budget, the thinktank is calling for an end to the freeze on local housing allowance (LHA), which has been held at cash levels since autumn 2024.

According to the foundation, a typical two-bedroom household could face a shortfall of £158 per week between what LHA covers and actual rent costs, as rents continue to rise. The warning is directed at John Healey, the chancellor, with the thinktank urging immediate action in next month’s fiscal statement.

The report frames the issue as a direct consequence of the LHA freeze, which has left support for renters increasingly out of step with market conditions. Without intervention, the foundation argues, many low-income families will struggle to meet housing costs, deepening existing pressures on household budgets.

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Analysis

Why this matters

  • A £158-per-week shortfall could force low-income families to choose between housing and other essentials, exacerbating poverty and financial insecurity.
  • The freeze on LHA has been in place since autumn 2024, and the upcoming budget is a critical opportunity for the government to address the mismatch between housing support and rising rents.
  • The warning affects more than 1.1 million households, indicating a broad-scale problem that could have significant social and economic consequences if left unaddressed.

Background

Local housing allowance is a benefit designed to help low-income tenants in the private rented sector cover their rent. It has historically been linked to local market rates, but recent policy decisions have frozen it in cash terms, meaning the amount does not increase even as rents climb. This creates a growing gap between the support provided and the actual cost of housing, particularly in areas where rents have risen sharply. The Resolution Foundation is a UK-based thinktank focused on improving living standards, and its research often informs policy debates around welfare and housing.

Key perspectives

  • Resolution Foundation: Argues that ending the LHA freeze is essential to prevent a housing affordability crisis, warning that the current trajectory leaves millions of families at risk of financial hardship.
  • Government (implied): The Treasury, led by Chancellor John Healey, will need to weigh the cost of reversing the freeze against other fiscal priorities in the upcoming budget, including broader economic pressures.
  • Critics of the report: Some may argue that increasing housing benefits could be costly or that other measures, such as boosting housing supply, are more sustainable long-term solutions, though the report’s immediate concern remains the freeze.

What to watch

  • The chancellor’s budget announcement next month for any changes to local housing allowance rates or broader housing benefit policy.
  • Upcoming rent data for the private rented sector, which will indicate whether the gap between LHA and actual rents continues to widen.
  • Any official response from the Treasury or Department for Work and Pensions in the lead-up to the budget, which could signal a policy shift.

Sources

Zotpaper

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