The Resolution Foundation, an economic think tank, has urged the government to allocate £6 billion by the 2029/30 fiscal year to address rising rental costs for low-income households. The proposal calls for Chancellor John Healey to use the upcoming October Budget to relink the Local Housing Allowance (LHA) to current market prices. The LHA is the mechanism used to calculate housing benefit levels for renters, intended to cover the lowest 30% of rents in a given area.
The LHA has been frozen since April 2024, despite rising market rents. According to the Resolution Foundation report released on September 18, 2026, the gap between LHA rates and market rents is projected to reach a record 23.3% in October. Research from Citizens Advice and Crisis further indicates that less than 2% of UK properties are currently affordable for those receiving housing benefits.
Economic data cited in the report shows that 58% of working-age adults in private tenancies who receive housing support were in material deprivation during 2024/25. One in five of these individuals reported being unable to keep their homes warm, while one in eight could not afford three meals a day. Resolution Foundation economist Stephen Hunsaker stated that restoring the automatic annual linking of LHA would relieve pressure on low-income families, noting that a previous relinking in April 2024 reduced the number of Universal Credit households facing rental shortfalls by more than 150,000.
The proposed plan involves an annual expenditure of £2 billion to restore the automatic link between benefits and local market rents. Proponents, including Mairi MacRae of the housing charity Shelter, argue that the current freeze forces families to choose between food and rent, often resulting in long-term stays in temporary accommodation due to a lack of affordable housing. The Resolution Foundation's analysis suggests that the cost would primarily benefit tenants rather than landlords; their study of the April 2024 relinking found that only 10p of every additional pound in support resulted in higher rents at the bottom of the market.
The decision on whether to adopt these recommendations rests with the Treasury ahead of the next Budget scheduled for October 2026. If the government chooses not to relink the LHA, the Resolution Foundation warns that the freeze will be locked in for another year, potentially increasing the risk of homelessness for renters unable to bridge the gap between their benefits and their bills. The government has not yet issued a formal response to the proposal.