The Department for Work and Pensions (DWP) has confirmed a significant freeze on a crucial benefit, leaving hundreds of thousands of private renters facing a growing financial gap. While other state benefits are set to rise from April 2026, the Local Housing Allowance (LHA) will remain static throughout the 2026/27 financial year.
The £2,200 Annual Shortfall for Renters
New analysis from the Institute for Fiscal Studies (IFS) reveals the stark reality of this policy. The freeze means tenants in an average three-bedroom property will face a typical weekly shortfall of £43 between their housing support and actual rent. Over a full year, this gap amounts to a staggering £2,214 that struggling households will have to find from other, often already stretched, parts of their budget.
The LHA determines the maximum housing benefit available to private renters claiming Universal Credit. Its core purpose is to make renting accessible and help prevent homelessness by theoretically covering the cheapest 30% of rental properties in any local area. However, when the benefit is frozen, it does not keep pace with rising market rents.
Why a Freeze Creates a Deepening Crisis
The current crisis stems from the LHA rates being based on rental data from the year to September 2023. Since that period, UK rents have grown by approximately 19%. By failing to increase the LHA in line with this inflation, the government has enacted a substantial real-terms cut to housing support.
This policy directly affects more than 1 million households whose rent exceeds the current frozen LHA rates. The IFS emphasises that privately renting households are already a disproportionately poor demographic, with a relative poverty rate of 37% compared to 21% across the whole population.
Impact on Living Standards and Disposable Income
The consequences for affected families are severe. The IFS reports that these real cuts to LHA rates reduce disposable income (after housing costs) by an average of 6%. For those in the poorest fifth of the population, the impact is doubled, with a 12% reduction in their disposable income.
This freeze comes despite the government announcing increases to other benefits from April 2026. The LHA was last uplifted in 2024, and the DWP has now confirmed rates will remain unchanged until at least April 2026. This creates a perfect storm where rental costs continue their upward climb while the vital financial assistance designed to cover them remains stuck at a level that is increasingly out of touch with reality.
The growing chasm between support and actual cost places immense pressure on household budgets, forcing difficult choices between essentials like food, heating, and keeping a roof over one's head. The policy underscores the ongoing challenges within the UK's welfare system and the private rental sector.
