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Freezing Local Housing Allowance (LHA) rates would leave almost one million children in families facing gap between their rent and housing benefits

Housing benefits postcode lottery worst for families in Welsh local authorities: see map here

IPPR recommends tackling child poverty by reforming welfare payments and building more social housing

New analysis from the Institute for Public Policy Research (IPPR) finds that a combination of welfare reforms, rising numbers of children in the private rented sector and a lack of investment in building social housing has led, and will continue to lead, to increasing child poverty, unless the government acts.

A new report by the think tank reveals that the 2011 decision to reduce LHA rates from the 50th percentile to the 30th percentile, alongside periodic freezes, has made at least two-fifths of private rental properties less affordable and led to an increase in child poverty.

There are now an estimated 440,000 households with children whose housing support no longer covers the costs of their rent. As the government has not committed to raising LHA rates in April 2025, the number of households affected is expected to rise by an additional 90,000 families by March 2026. This would leave an estimated 925,000 children affected by housing support shortfalls.

As rents rise whilst support is frozen, households will need to find the money to pay their rent from other sources – leaving families worse off overall despite benefit uprating come April in many cases.

This is a growing concern as the number of children in the private rental sector has grown from one in twelve to one in five over the last 20 years.

The report also identified a concerning postcode lottery with LHA rates. Over half (62 per cent) of families renting privately in Wales face a shortfall, while only a third (31 per cent) of those in Scotland do. The variation between local authorities is even more stark, with 74 per cent of claimants facing a shortfall in Neath Port Talbot, compared to just 9 per cent in East Lothian.

A key challenge is the lack of social housing since right-to-buy was introduced in 1979. Waiting lists for social housing have now reached a 10-year high of 1.33 million.

Social housing has the twin benefit of ensuring that a family’s housing benefit, or housing support element of Universal Credit, will meet their entire housing costs, as well as guaranteeing a home for life.

The state currently spends £32bn a year on housing support through the benefits system, much of which goes into the pockets of private landlords. IPPR modelling suggests that if the government built and moved all families with children on means-tested benefits into social housing this would save £3bn per year in housing benefit expenditure and reduce relative poverty by 200,000. Whilst government would need to consider the cost of building social housing, this would also help to contain the ballooning cost of temporary accommodation, where local authorities are forced to shell out for inappropriate, and expensive, housing solutions in the private sector.

Among the policy solutions outlined in the new report, IPPR is recommending:

Raising LHA rates to the 30th percentile of rents and removing the household benefit cap from April 2025, followed by a long-term ambition to raise them to the 50th percentile. This should go hand-in-hand with other reforms to social security such as ‘locking-in’ annual LHA increases.

Establishing a new English housing tribunal to enforce new rights given to private renters by the Renters’ Rights Bill, as well as conducting a review into the evidence for formal rent caps.

Building 100,000 social homes every year over a 20-year period to reverse the losses to social housing stock.

Henry Parkes, principal economist at IPPR and author of the report, said:

“A safe, secure, and affordable home should be the foundation for every child’s future. Instead, too many families are trapped in a cycle of poverty and instability caused by unaffordable rents and insecure tenancies. Housing reform isn’t just a moral imperative—it’s an economic necessity.”