Tower Hamlets Council is set to increase rents for some residents living in temporary housing, a move aimed at maximising Housing Benefit subsidy income and addressing a potential budget shortfall. The council considered alternative options, including maintaining the status quo, but rejected them because they would prevent the council from reducing its expenditure on Housing Benefit subsidy loss, presenting significant risk to the council's overall ability to balance its revenue budget. Another option considered was increasing rent levels for affected properties to the 2025/26 LHA rates but not amending the Housing Benefit classification of council owned properties to allow claims of 100% of the actual rent charged, which would only deliver a smaller reduction in the council's overspend on Housing Benefit subsidy loss and would not be in keeping with the council's statutory duties to achieve best use of its resources.
The decision, made at the Mayor's Executive Decision Making meeting on 31 October 2025, will affect approximately 587 council-owned properties used as temporary accommodation for homeless households. The council aims to align rents with current Local Housing Allowance (LHA) rates and reclassify the properties for Housing Benefit purposes.
The council anticipates an additional £7.1 million per year in income, with approximately £3.0 million expected in the current financial year. According to a report by David Joyce, Corporate Director of Housing and Regeneration, this will be achieved by updating how affected properties are treated for Housing Benefit purposes and uplifting the rent on those properties to current Local Housing Allowance rates. The report states that for the 88% of households in receipt of Housing Benefit, any increased rent charge will be funded by an equivalent increase in the Housing Benefit award they are able to claim.
While the move will increase rent for some, the council assures that the majority of affected households (88%) will see an equivalent increase in their Housing Benefit award. For the remaining households, the council plans to establish a hardship fund to avoid any adverse financial impact. The report stated that £0.404k has been set aside in the current financial year for the hardship fund.
Support will be provided to all households that are not currently in receipt of Housing Benefit through proactive intervention. This targeted outreach campaign will include writing to all affected tenants and direct text messaging, offering personal advice sessions to discuss options to ensure that they are not negatively affected by the rent increase. These options will include: undertaking a review of their welfare rights assessment, considering moves to more affordable Temporary Accommodation where suitable, offering money management advice, and where all other options are exhausted, providing a top-up hardship grant to cover any additional in-year rent costs that the household would otherwise be facing as a result of the decisions recommended in this report.
The hardship fund will be available to cover additional rent costs that cannot be mitigated through other means, and will also cover any additional costs that may occur in a small number of Households in relation to the total benefit cap, bedroom tax and some legacy benefits. The application process will involve proactive intervention, including writing to all affected tenants and direct text messaging, offering personal advice sessions to discuss options to ensure that they are not negatively affected by the rent increase. These options will include undertaking a review of their welfare rights assessment, considering moves to more affordable Temporary Accommodation where suitable, and offering money management advice. Where all other options are exhausted, a top-up hardship grant will be provided.
The council currently provides temporary accommodation to approximately 3,250 households, with 587 housed in council-owned properties. The council classifies these properties in a way that allows them to reclaim only up to 90% of the January 2011 LHA rate in subsidies from the Department for Work and Pensions (DWP). The new practice will allow the council to reclassify these properties and claim Housing Benefit subsidy for 100% of the actual rent charged.
The council currently charges Social Rent to homeless households in temporary accommodation, which is lower than market rates. By aligning rents with current LHA rates, the council aims to maximise Housing Benefit Subsidy income. The Public Reports Pack includes a report with further details.
An Equality Impact Assessment Initial Screening Tool, included in the Public Reports Pack, concluded that the impact of the proposed changes would be neutral, as any increase in rent will be offset by either increased Housing Benefit or a hardship grant.
Legal Services advised that the council can charge reasonable charges for temporary accommodation, referencing Section 24 of the Housing Act 1985 and Section 206 of the Housing Act 1996. They also noted that the council must consider the financial resources available to individuals when determining suitability of accommodation, including social security benefits.