Benefit cap: families trapped by lack of affordable homes

A lack of affordable housing is one of the biggest barriers preventing families from escaping the benefit cap, the Child Poverty Action Group (CPAG) have found.

They spoke to 25 families four times between 2020 and 2024 to find out how they’ve been affected by the cap and how they’ve tried to improve their circumstances.

This comes after the previous government claimed that people could escape the cap by getting a job, working more hours or moving house.

What is the benefit cap?

The cap limits the money a household working less than 16 hours a week at minimum wage can receive in benefits.

It’s different from the two-child cap, which stops people claiming universal credit for more than two children except in special circumstances.

The wider benefit cap was introduced in 2013 and was originally set at:

• £26,000 a year for families
• £18,200 for single adults without children

The limit was lowered just three years later and different rates were brought in for London and the rest of Great Britain – but even though it’s been increased since then, the current cap is still lower than when it was first introduced:

• £25,323 in Greater London
• £22,020 outside London

Who’s affected by the benefit cap?

CPAG says 122,000 households are impacted by the cap, losing an average of £61 a week.

Of these:

• 71% are single parents
• Half have a child under five

Not enough suitable homes

None of the families CPAG spoke to were able to escape the benefit cap by moving house.

Contrary to the last government’s claims, people often ended up worse off after moving because of a lack of cheaper options.

Further analysis looking at 1.6 million private rental listings backed up people’s experiences.

Using a single parent of three as their benchmark, CPAG discovered there is less than one affordable three-bedroom home for every 10 families affected by the cap.

They found just 4,400 affordable rental homes across the UK for more than 28,000 single parents with three kids.

Even most two-bedroom homes, which would be too small for a family with three children, were found to be unaffordable, further limiting options.

Overall, just one in six homes in the UK are suitable to house families subject to the benefit cap, according to CPAG.

Low local housing allowance rates

The charity also reported that hundreds of thousands of families have been pushed below the breadline because of low local housing allowance (LHA) rates.

LHA rates are designed to make sure that 30% of the rental market is affordable to those receiving welfare support for housing costs.

But the rates have been frozen since 2020.

According to CPAG, adjusting these rates to rise alongside rents would mean lifting 75,000 children out of poverty and raising the limit to cover the cheapest 50% of housing would help 130,000 kids.

However, this wouldn’t help the 122,000 families subject to the benefit cap and CPAG warns raising the amount of housing support offered would see other households “pulled into the cap”.

The effect on living standards

Even if capped families were able to move to the cheapest homes in their area, CPAG worked out that almost half (44%) wouldn’t be able to meet their basic needs for food, clothing and shelter.

To put this into perspective, families in London and the south-east would have less than £4 per person each day to live on, forcing people to cut back on essentials like food, heating and clothing.

The research also highlighted that many capped families live in expensive and unsafe homes that aren’t suitable for their needs – with damp, mould, pest infestation and overcrowding among common problems.

What can be done?

CPAG is calling for the government to scrap the benefit cap, pointing out the cost would be relatively low at £300m.They welcome Labour’s plans to build 1.5 million new homes as they acknowledge more housing could reduce rents and make it cheaper to reform LHA.But they point out capped families need help now and building houses takes time. That’s why they believe abolishing the cap needs to be a priority.