LHA affordability gap hits record high as rents continue to rise

The gap between Local Housing Allowance (LHA) rates and the 30th percentile of local rents has reached record highs.

Research by the Resolution Foundation reveals a record gap of 23.3%, equivalent to a £170 per month ‘affordability gap’ for a typical family in a two-bedroom home.

The think tank is calling on the Chancellor to unfreeze LHA rates in the upcoming Budget this week.

LHA shortfall in every region

LHA rates have been frozen since 2024, when they were pegged to 2023 rent levels. But since 2023, average private rents have risen by 23.3%.

According to the data, 900,000 families on Universal Credit were paying rents above their LHA entitlement.

Every region in England now contains at least one local authority where there is a shortfall of more than £100 a month between the LHA rate for a two-bedroom property and the estimated 30th percentile rent level.

In Manchester, this gap now stands at £250 a month, while in Newcastle, where rents are relatively low, it is £180 a month.

The think tank is urging the Chancellor to re-link LHA support to the 30th percentile of local rent.

Urgent government action

Hannah Aldridge, senior research and policy analyst at the Resolution Foundation, said: “The affordability gap between the 30th percentile rent level and Local Housing Allowance has now reached a record high. Without urgent government action this gap will keep growing and pushing down on the living standards of low-income families in the private rented sector.

“John Healey’s first Budget is an opportunity to fix this once and for all by committing to automatically linking LHA to private rent levels each year.

“Previous Resolution Foundation analysis suggests re-linking LHA would primarily benefit tenants, not landlords. And with rising energy bills bringing the cost of living back into focus, now is the right time to give hard-pressed households reassurance on future rent support.”

Previous Resolution Foundation research has shown that when the government last raised LHA support, it was private tenants, not landlords, who overwhelmingly reaped the benefits, with just 10p in every pound of extra LHA support showing up as higher rents at the bottom of the market.

The same research found that in 2024-25, over half (58%) of working-age adults in private renting families on housing support were in material deprivation, with one-in-five unable to afford to keep their homes warm