They should get rid of the housing benefit cap!

[Diggydiggydumbdum]

I’ve been thinking a lot about the housing benefit cap (Local Housing Allowance cap), and the more I read, the more it feels like a scam. It was meant to save money by capping how much rent housing benefit would cover, but instead, councils are spending eye-watering amounts on temporary accommodation, and families are left stuck in the middle.

Before the cap, housing benefit covered private rents—even the inflated ones landlords charged. It wasn’t perfect, but at least people had more options: rent privately or wait for council housing. Now, with the cap, so many families can’t afford private rents and are being evicted, which means councils have to step in with temporary accommodation.

And here’s the kicker: councils spent £1.7 billion on temporary accommodation in 2023, almost double what they spent a decade ago. Individual households in temporary accommodation can cost councils £10,000–£20,000 a year, if not more. The money they’re “saving” on housing benefit? It’s being swallowed up by this anyway.

Plus, the conditions in temporary accommodation are often terrible—unsafe, overcrowded, and miles from people’s support networks. Kids are growing up in limbo, and families have no choice over where they live. Meanwhile, private agencies and middlemen are making a fortune out of the system.

Wouldn’t it make more sense to tackle the root of the problem? One option could be adjusting housing benefit to reflect real rents, so more people could afford private housing again. Another idea is rent caps, like they have in places like New York. If rent control works in one of the most expensive cities in the world, why can’t we try it here?

People always say, “Just move to a cheaper area,” but that ignores the fact that more expensive areas still need workers. Who’s going to do the jobs that keep those places running—childminders, cleaners, hairdressers, carers—if everyone has to move out?

It just feels like the current system isn’t working for anyone (except maybe the landlords and agencies profiting from temporary housing). Why aren’t we talking about this more?

It seems there’s a bit of confusion here about how housing benefit and Universal Credit (UC) work. Housing benefit isn’t designed to cover the full cost of rent for most private rentals anymore—it’s capped at the Local Housing Allowance (LHA) rate for your area, which often falls well short of actual rent prices. Many people claiming housing benefit or UC still have to make up the shortfall from their own limited income, leaving them in a tough spot.

Let’s take an example: a single parent working 30 hours a week on minimum wage (£10.42/hour) because they also have caring responsibilities at home. That’s about £1,250 a month before tax. They live in a privately rented three-bedroom home costing £2,000 a month. The LHA cap for a three-bedroom home in many areas is much lower, let’s say £1,000.

Initially, housing benefit would cover up to £1,000, leaving a £1,000 shortfall they’d need to pay out of their own income. But here’s the catch: for every £1 they earn over their work allowance (a small threshold), their housing benefit is reduced by 63p. This means that as they work more or earn more, their housing benefit entitlement goes down, leaving them with little extra money to cover rent or other costs.

This creates a situation where people feel stuck. They want to work more, but the steep taper rate (63p lost for every £1 earned) means they’re barely better off. Combine this with rising rents and the gap between the LHA and actual rent, and it’s clear the system isn’t working well for low-income working families either.

As for the comparison with those not receiving benefits, it’s not as simple as “paying £554 while others pay £2,000.” The reality is that people on benefits are still left struggling to cover their rent, and in many cases, they’re worse off than people earning higher salaries because of these cuts and caps.

@Itiswhatitis80 I hear you.

Another awful aspect of this is it costs around £300 per week to rent a room at a refuge (if you are in work or have savings). So working people are essentially blocked from accessing a refuge

That sounds a good idea actually. Not sure how it would work in practice though

But don't you now have 2 incomes to pay the whole rent out of?

I do a lot of comparative UC calculations for clients, and I don't think I've ever come across a scenario where that's the case.

Tackling the root of the problem would be building a shit load more council houses

@LakieLady now I don't claim uc as I remarried. My ex does however and has £1.1k of his £1.2k rent paid despite having the children 40% of the time. It's absolutely allowed surprisingly and seems very unfair that he can claim despite earning £36k (this is London zone 4).

I agree with you about the taper rate, OP. It's a big disincentive to work more hours.

When you factor in the deductions for tax, NI and the loss of 55% of what's left from your UC, the net gain from the additional income is only just over 30%.

If you are working or disabled then you are exempt from the benefit cap, only a very tiny percentage of people on benefits are caught by the cap.

In most cases it doesn't apply.

So the housing crisis isn't linked to the benefit cap

I'm deemed too ill to work (at the moment) but not ill enough to be exempt from the benefit cap. It very much affects me. And I'm almost certain that my mental health issues would have improved much faster if I wasn't constantly worried about money, and living in crap accommodation. I can't afford to move. My landlord knows that and also knows that if he does the bare minimum repair wise I can't do anything about it.

They need to get rid of the bedroom tax too.
I'll never understand why they haven't got in place for pensioners but everyone else has to pay it.

My neighbour is an elderly woman living in a 3 bed on her own, unfortunately in our village we have no social flats or bungalows. Only houses so she has nowhere to move to. She is exempt from the tax. If she was under pension age she would be forced to pay it, makes no sense

I think there’s some confusion here between the benefit cap and the housing benefit cap—they’re two different things.

The benefit cap is a limit on the total amount of benefits a household can receive. You’re right that many people, such as those who are working or disabled, are exempt from it.

But what we’re talking about here is the housing benefit cap, also known as the Local Housing Allowance (LHA). This cap applies to anyone claiming housing benefit or the housing element of Universal Credit, regardless of whether they’re working or not. It’s based on the number of bedrooms your household needs and the area you live in. The problem is that these LHA rates have been frozen or poorly updated for years, and they often don’t reflect the actual cost of renting.

For example, in many areas, the LHA cap for a three-bedroom home is around £1,000 a month, but the actual market rent for that same property could easily be £2,000 or more. The shortfall has to be covered by the tenant, whether they’re working or not, and if they can’t manage it, they risk eviction and homelessness.

This gap is a major contributor to the housing crisis because it’s pricing people out of the private rental market, pushing them into temporary accommodation or overcrowded homes. So while the benefit cap doesn’t apply to everyone, the housing benefit cap affects a much larger group of people, including working families.

The housing crisis is absolutely linked to the housing benefit cap—and it’s part of why councils are spending billions on temporary accommodation while families are left struggling.

I think it's ridiculous.
My dd went through a period of unemployment through no fault of her own. She was renting the cheapest 1 bedroom flat in town. She was 26 and only entitled to the shared accommodation rate.
So, her total UC was something like £25 a month more than her rent.
How are you supposed to magically give notice on a 1 bed flat and find a flat share immediately?
Luckily she had parents that could help her but the state is in no way a safety net.

The bedroom tax absolutely needs scrapping. A few years ago Labour promised they would do just that, however they are proving themselves to be liars.

You only pay the bedroom tax if you claim HB.... and it is not really paying extra. It is just you don't get the LHA for more rooms than you need.
Some people are in social/council housing, and do not receive HB.

The houses don't somehow disappear because private landlords sell up.

To be fair, referring to it as the "housing benefit cap" when it's actually called the LHA rate isn't going to help with distinguising between the two.

And to be clear. I know the difference, but they are linked in a way. If my landlord puts my rent up, but still in line with LHA rates I wouldn't actually get any of that extra money because of the benefit cap.

It’s also worth mentioning that the real scandal here is that taxpayers are actually paying more for private rents due to the shift towards temporary accommodation. Councils are now paying above-market rents for properties used as temporary housing—often far higher than they would have spent on housing benefit in the past. Before the housing benefit cap, councils were paying about £1.1 billion a year on temporary accommodation. Now, that figure has risen to £1.7 billion in 2023. Despite the benefit cap, taxpayers are still spending more, but we’re led to believe it’s working when in fact, it isn’t.

In some areas, temporary accommodation costs can reach £100-£200 per week more than the housing benefit that would have been paid for the same property, depending on the local market. What’s worse is that the money is going straight into private landlords’ pockets, while the rest of us continue to foot the bill, thinking the cap is saving us money. But it’s not saving anything—it’s simply funneling more money to landlords and leaving tenants suffering in precarious and overcrowded conditions.

On top of this, tenants in temporary accommodation have little security. Unlike those in social housing, they don’t have secure tenancy agreements. These temporary contracts often include clauses that prevent them from having people stay over and can allow landlords or councils to ask them to move at very short notice. These families don’t have the stability they need to rebuild their lives, and the rest of us are paying the price for it, without seeing any real improvement.

The cap was supposed to save taxpayers money, but in reality, it’s just costing more while leaving both tenants and taxpayers worse off. The only people truly benefiting from this system are the private landlords who are getting paid higher rents for temporary accommodation, all while the housing crisis worsens.

What's being done about the houses that are lying empty and falling into disrepair because of absent owners? There are ten 3 bed houses near me which are empty & could house families who need them. Yet, there's also a massive waiting list for social housing in my area.

And stop selling off the ones we already have

Cheap, here 1 bed more than £900

Because private landlords are providing social housing in lieu of the government having enough housing stock. And if the cap doesn’t cover the landlord’s costs, then they will stop providing housing too. This would leave more people in temporary and insecure accommodation, or even homeless.

The costs and risks to landlords have gone up significantly over the past few years and these all need to be factored into how a landlord prices their property:

• the high inflation rate has doubled or even tripled mortgages.
• mortgages are no longer tax deductible so there needs to be more “profit” in the rent to allow the landlord to meet their income tax bill.
• service charges on flats are unregulated and skyrocketing. Again, a cost to the landlord that has been doubling, tripling or more over the past couple of years.
• there is a shortage of tradesmen available for maintenance and repairs and their prices have shot up.
• the cost of materials for maintenance and repairs has shot up with the high rate of inflation over the past couple of years.
• Trouble tenants are now more difficult and more expensive to remove.

Most landlords are not “lining their pockets”. It’s a much less profitable business to be in now so guess what - landlords will exit the market. If caps and rents generally don’t start to reflect the true cost of the properties being rented, their housing shortage will be exacerbated.

Exactly what I was thinking. £ 300 might not sound like much but if you only get about £400 in esa/ jsa/ UC it certainly is.

The housing allowance cap was originally set at the median local rent so households on benefits could rent from cheapest 50% of rented housing available. I don't understand why the conservatives didn't update the allowance as rents increased.

I think private landlords should either sell with tenants in situ so don't have to be evicted or have to find them an equivalent property in the same school catchment.

No, but most people renting (and definitely those on housing benefit) can’t afford to buy them.

Everything has unintended consequences. Your 'solution' would lead to private tenants not on housing benefit being crowded out by state subsidised tenants who are able to pay higher rents - and who would have no incentive to negotiate lower rents when the taxpayer is handing them a blank cheque.

Too many people - not enough houses.