Policy Exchange has proposed keeping Local Housing Allowance frozen until housing-support spending falls in real terms, then resetting it to the 10th percentile of local rents and linking future uprating to local rent growth.
The proposal appears in the think tank’s Fairer Housing Support report, published on 24 September. It is not Government policy and does not change the amount a landlord can currently receive from a tenant claiming Housing Benefit or the housing element of Universal Credit.
A lower reset point would leave the scheme designed to cover only the cheaper end of each local market, so landlords who let to claimants would need to assess rent affordability against a potentially wider gap between support and their asking rent if ministers ever adopted the recommendation.
Policy Exchange links LHA reset to lower spending
The report recommends retaining the present freeze until total housing-support expenditure has fallen in real terms from its 2025-26 baseline. It would then set LHA at the 10th percentile of local rents, rather than returning it to a higher share of the market, and update the allowance each year in line with rent growth in the relevant area.
Policy Exchange estimates Housing Benefit and the Housing Element of Universal Credit will cost £37.2bn in 2025-26, rising to £43.5bn by 2030-31. Its wider package of social-housing and housing-support reforms is modelled to produce £14.3bn of savings and additional revenue over five years to 2031-32.
Those figures are the think tank’s modelling, not Treasury costings or a confirmed spending plan. The report combines its LHA proposal with changes to social tenancies, rent-setting and support for working-age claimants, so the £14.3bn total should not be treated as a saving from the LHA reset alone.
Cheaper-rent benchmark would narrow the homes in scope
Local Housing Allowance is used to calculate housing-cost support for many private renters. A rate set at the 10th percentile would be aimed at rents at or below the lower tenth of the local market, rather than at the rent charged for a particular property. The actual award can still depend on the claimant’s household size, benefit rules and circumstances.
This follows Landlord Knowledge’s August report on Propertymark’s warning that crisis payments cannot close the LHA gap, which argued for restoring rates to at least the 30th percentile of local rents. Landlord Knowledge’s July analysis of the shrinking share of listings affordable on housing benefit also showed the practical gap that can emerge when support falls behind local rents. Policy Exchange takes a materially different position by proposing a lower 10th-percentile reset after a further freeze.
That difference is important for landlords with tenants who rely partly on housing support. A lower benchmark would not prevent a landlord charging a higher rent, but it could increase the amount a tenant needs to meet from earnings or other income. Rent setting would still need to reflect the local market, affordability checks and the risk of a shortfall becoming arrears.
Report is a recommendation, not a rule change
Policy Exchange also proposes reducing long-term housing support for some working-age claimants who are expected to work, while protecting people without work requirements and allowing safeguards for exceptional circumstances. It says the full package could create more than one million additional social-housing opportunities over a decade, including 793,000 through a proposed time-limited Opportunity Route.
The ideas would require political decisions and detailed implementation before they could affect private landlords. No new LHA rate, commencement date or change to landlord obligations is set out in the report. The relevant proposal is available in Policy Exchange’s Fairer Housing Support publication.
What this means for landlords
- If you let to claimants: continue to check the current local LHA rate and the tenant’s full affordability, rather than pricing a tenancy on a proposed future formula.
- Watch for: any Government response to the recommendation, especially if it sets out a new percentile, a start date or transitional rules.
- Bottom line: the 10th-percentile reset is a think-tank proposal, not a live cut to LHA, but it highlights the exposure created when support trails local rents.
Editor’s view
Policy Exchange has put a clear dividing line on the table. A system calibrated to the cheapest tenth of rents would shift more of the affordability test away from the benefit award and onto tenants’ other income. Landlords should read it as a policy signal, not a reason to alter a current tenancy.
Author: Editorial Team – UK landlord & buy-to-let news, policy, and finance
Published: 25 September 2026
Sources: Policy Exchange
Related reading: Propertymark warns crisis fund cannot close LHA gap
