The Department for Work and Pensions (DWP) has provided an update on upcoming changes that will affect Housing Benefit and Universal Credit claimants facing a so-called 'cliff edge'. Ministers are finalising legislative alterations that could have significant consequences for claimants' financial situations.
What Is the Cliff Edge?
Currently, claimants living in supported housing or temporary accommodation encounter a 'cliff edge' when they start earning money, leading to a loss of benefits. The threshold at which this occurs is set to be revised, with adjustments expected by autumn 2026.
The rule revolves around 'earned income disregards'. The DWP aims to increase the amount people can earn before it affects their Housing Benefit calculation.
Parliamentary Question Sparks Update
The issue came to light after Labour MP for Darlington, Lola McEvoy, asked the DWP about the planned timetable and merits of these changes. The response came from Stephen Timms, Minister of State for the DWP.
Timms stated: "As announced at Autumn Budget, the department will be introducing new earned income disregards for those in receipt of Housing Benefit and live in Supported Housing and Temporary Accommodation. These disregards will help smooth the transition between the Universal Credit and Housing Benefit for individuals in Supported Housing and Temporary Accommodation as they move into work or increase their earnings, ensuring work always pays."
The new disregards will be in place from autumn 2026. This requires legislative changes and IT updates to local authority systems. The DWP has already begun stakeholder engagement to ensure effective implementation, accompanied by clear communications to support local authorities, housing providers, and third sector organisations.
Background and Impact
Chancellor Rachel Reeves announced the changes in the Autumn Budget last year, stating: "The government is introducing new earned income disregards in Housing Benefit for claimants in supported housing and temporary accommodation. This will reduce the financial cliff edge when moving into, or progressing in, work, ensuring that work pays."
Industry experts highlight that the current system discourages employment. Homelessness charity St Mungo's submitted a briefing note to the DWP explaining that people in supported housing face a specific barrier: while those in the Private Rented Sector become better off as they work more, supported housing residents see benefits taken away more quickly and can become worse off when increasing hours.
This anomaly arises because supported housing residents receive Housing Benefit for rent but are on Universal Credit for living costs. The high Housing Benefit taper rate (65%) creates a cliff edge where increased hours lead to reduced overall income, putting residents at risk of rent arrears.
St Mungo's reported: "Because of this cliff edge and the fear of not being able to afford their rent, we often see residents securing jobs that they need to turn down because they are 'too many hours'." Some with full-time jobs ask to reduce hours or give up work entirely. The charity's 2023 survey found that 27% of residents cited concerns about benefits problems as a barrier to employment.
The DWP's update confirms that the new disregards will address these issues, ensuring that work always pays for those in supported housing and temporary accommodation.
