The Department for Work and Pensions (DWP) has confirmed a major change to housing benefit rules, set to come into force on October 6, 2026. The reform will immediately impact approximately 300,000 people living in supported housing and temporary accommodation, removing a system that previously penalised residents for increasing their working hours.
Ending the Cliff Edge
Under the current rules, housing benefit claimants faced a less generous work allowance compared to Universal Credit, creating what the DWP described as a "cliff edge" that discouraged employment. The government stated that this system forced vulnerable people in supported housing to choose between staying out of work or risking the loss of their housing support. Some landlords even discouraged residents from taking jobs to protect their own rental income.
The DWP said: "The less generous rules for Housing Benefit created a cliff edge that trapped people on benefits rather than supporting them into work. As part of the Government's commitment to move from a welfare state to a working state, the regulations change how Housing Benefit is calculated so it works in the same way as Universal Credit – a change that will incentivise work for 315,000 people when they come into force in October 2026."
Ministerial Statement
Sir Stephen Timms, Minister for Social Security and Disability, announced the change, which was laid in Parliament on July 6, 2026. He said: "The system we inherited was actively pushing some of the most vulnerable residents away from work rather than towards it. These changes fix that - ensuring residents can keep more of what they earn, so that taking a job or increasing hours always pays better than benefits."
He added: "This announcement delivers on a commitment made in our Autumn Budget, and forms part of the government's wider plan to reform the welfare system - tearing out the barriers that have trapped people in dependency. We are replacing that system with one that rewards work and ensures people keep more of what they earn, while protecting those who need it most."
Five New Earned Income Disregards
As part of the reform, five new earned income disregards are being introduced for working-age Housing Benefit claimants in supported housing and temporary accommodation. These disregards will allow claimants to earn a certain amount before their housing benefit is affected, aligning the system with Universal Credit's work allowance.
Broader Welfare Reforms
The housing benefit change comes alongside other DWP initiatives aimed at supporting people into work. The DWP noted: "We have already rebalanced Universal Credit to tackle the perverse incentives that discouraged work and introduced Right to Try legislation, allowing sick or disabled people to try work without the immediate fear of reassessment."
Additional measures include the Connect to Work programme, which provides tailored, local support to help 300,000 people into employment, and the deployment of 1,000 Pathways to Work advisers to assist those previously written off by the previous government.
