Capped and trapped: why the benefit cap must go

In Labour’s mission‐led government, tackling poverty is not considered a mission in its own right. But that’s not to say that the issue is not on the agenda at all. Child poverty is understood to be central to the ‘opportunity’ mission, and a child poverty strategy will be published later this year – not a moment too soon. There are also other policy planks that should, in the long run, make a difference: in December, prime minister Keir Starmer made an ambitious commitment to building 1.5 million new homes this parliament in England, part of the ‘economic growth’ mission, with an emphasis on increasing access to affordable housing.

Expanding the supply of housing ought ultimately to reduce rents, helping the many families whose housing costs push them into poverty. But this is a very long‐term strategy. It offers nothing to those in poverty today. For them, the obvious and only way to provide relief is through the social security system – revisiting the cuts and reforms to housing support over the last decade which have massively increased the pressures on those living in rented housing on a low income. This action is urgent. A five‐year parliamentary term is simply too long a time frame for a growing child.

How families lose out

Our recent mixed‐methods research focused on one housing‐related policy in particular: the benefit cap. Like its sister policy, the two‐child limit (which our research also examines), the benefit cap breaks the link between household need and benefit entitlement. While the two‐child limit means only the first two children are counted in the calculation of a family’s entitlement to universal credit, the benefit cap limits the total income a household can receive in social security benefits. It applies to ‘workless’ households, which are classified as those where no‐one earns the equivalent of at least 16 hours a week at the minimum wage. While households with disability benefit claimants are exempt, families with caring responsibilities for young children are not. The latest figures show that 122,000 households have their benefits capped, of which nearly three‐quarters (71 per cent) are single parents, half with a child under five.1 The average loss of income is £61 per week.

The benefit cap has only risen once since it was introduced just over 10 years ago, and was actually lowered in 2016. Perversely, the current cap levels – £22,020 outside London and £25,323 inside Greater London – are still lower than when the policy was first introduced in 2013. For the vast majority of capped families, it is rent that pushes the household into the cap. Once the landlord has been paid, families find themselves with very little income to meet all their other needs.

When seeking to justify the imposition of the benefit cap, the last government routinely argued that people could escape it by entering work/increasing their hours, or by moving to cheaper accommodation. Our study interrogated both these options. We found that capped families face multiple barriers to employment which mean that, while work may be an option for some, for others the effects of the cap can actually be to push them further away from the labour market. Here we dig deeper into what we found on the other supposed option: the possibility of moving to escape the cap.

Does moving house help?

Between 2020 and 2024 we walked alongside 25 families affected by the benefit cap, interviewing them up to four times over this period to better understand how the cap affects their lives, and the efforts they have taken to try to change and improve their circumstances. Our sample was concentrated in areas of London (Tower Hamlets and Hackney) and Yorkshire (Leeds, York and Bradford), and included both single parent and couple parent families.

During our fieldwork, not a single participant escaped or reduced the impact of the cap by moving to cheaper housing. Six families did move – sometimes after being evicted, sometimes out of choice – but often ended up being capped more rather than less as a result. When we asked them why, their answers were unequivocal: there simply were no cheaper options. Amanda, a single mum with four children, and Laura, a single mum with three children, told us:

‘I am in the cheaper accommodation… we’re squished and squeezed in this house, there’s five of us in a three bedroom with two box rooms and a slightly big double room… there’s nowhere to put our clothes and the house is riddled with damp.’ 

(Amanda)

‘I can say that is absolute gospel, I would not find cheaper private accommodation than the accommodation I’m in right now, and what am I supposed to do, call up the council and say to them, can you move me because it’s too expensive? You can’t get moved when you’re overcrowded, you can’t get moved when you’ve got damp all over your flat, let alone because you’re fed up of the bill. You think they’re gonna move you? That’s ridiculous.’ 

(Laura)

Struck by how universal this response was, but aware of the small size of our sample, we turned to large‐scale data to see what the national picture looks like. We undertook an analysis of 1.6 million private rental Zoopla listings for the 2022 calendar year, asking whether and where housing that was affordable under the benefit cap was available. This analysis underlined our qualitative findings, nailing the fundamental untruth that sits at the centre of the claims made by defenders of the benefit cap: housing that families can afford within the benefit cap simply does not exist in many places.

Zoopla analysis showed that the amount of social security support available for housing – a basic need – for families affected by the benefit cap falls well short of the market rents currently being charged. We focused on a single‐parent family with three children, who would in theory be entitled to social security support towards the rent for a three‐bed property. Under the benefit cap, we found that nearly three‐quarters of capped families live in areas where there is less than one affordable three‐bedroom property for every 10 capped families. Furthermore, there were only 4,400 affordable rental properties in the whole UK, compared to more than 28,000 capped single‐parent three‐child families. The vast majority of two‐bed properties – which would entail considerable over‐crowding for a lone parent and three children – are also unaffordable.

Our results suggest that opportunities for capped families to move – even quite far away – are extremely limited. Even if families were prepared to move anywhere to find cheaper accommodation, away from schools and existing social networks, in 2022 there were still only enough suitable properties in the whole country to house one in six of all capped families. Just as our interviewees told us, affordable housing simply does not exist.

The effect of the cap on living standards

The consequence of social security payments not covering market rents is that the living standards of affected families can be pushed to very low levels, because, as sociologist Matthew Desmond puts it, ‘the rent eats first’. Even if capped families were able to move to the very cheapest properties in their area, we calculate that 44 per cent of them would have their living standards pushed below a standard definition of destitution: unable to meet their basic needs for food, clothing and shelter. In much of London and the South East, families would be left living on less than £4 per person per day. The effect of the cap on living standards also came out very clearly from our interviews. Families are routinely economising on food, milk, heating, clothing and other basic essentials, while relying on wider family and charitable provision to get by.

On top of the material hardship created by the cap, our qualitative interviews also highlighted forcefully the very poor quality of the housing many capped families are living in. Their accommodation was frequently not just expensive, but also deeply inadequate for their needs and often unsafe: damp, mould, pest infestation and overcrowding were common.

One mother’s experience

Kalima is a mother of five who was first subject to the benefit cap when she separated from her abusive husband. When we first met Kalima, she was paying £1,250 to rent a housing association property, leaving her capped by £440 a month. In other words, Kalima received about £100 a week less than what the social security system assesses that her family actually needs as a basic minimum.

While Kalima wanted to find a way to escape the cap, the house she was renting was already too small – a three‐bed for her and her five children. She explained:

‘We are six people in a four‐person flat so… we’re overcrowded as it is, so there’s no way we could get a house, this house [is a] good price rent‐wise. So I couldn’t downsize… it’s affecting the kids being in a small three bedroom anyway, so I couldn’t downsize, so that’s like not an option.’

Between our third and our fourth interview, Kalima moved into a bigger house when the block of flats she had been living in was demolished. With an extra bedroom, the new house was more suitable for her family so in some ways this was an improvement. But the rent was even more expensive, leaving her facing an increased cap of almost £700 a month. As the cap pushed her deeper into destitution, Kalima told us that her mental health was being affected. She explained:

‘With the financial stress, my blood pressure has been – as well my mood, it's been up and down… I'm on antidepressants.’

The damage is happening now

Policy defences of the benefit cap have used a lens of choice to suggest that families simply have to make different (subtext: better) choices in order to escape the cap. But this rhetoric ignores the reality of the options available. In practice, families find themselves without any real choice to make: they are both capped and trapped in expensive, over‐crowded and often unsuitable housing.

The benefit cap is not the only housing benefit policy implicated in the rise in poverty after housing costs. Recent Resolution Foundation analysis shows that inadequate local housing allowance (LHA) rates also push many hundreds of thousands of households below the poverty line.2 These rates have been frozen indefinitely at the 30th percentile of 2024 rental prices, which means that as rent rises, more and more properties become affordable even for those not affected by the benefit cap. Repegging rates of LHA to rise with the 30th percentile annually would mean 75,000 fewer children living in poverty by the end of Labour’s current term in office. Going further and pegging LHA rates to the 50th percentile – where they used to be – would lift 130,000 children out of poverty. Yet while these changes would be very welcome, if the benefit cap remains, the 122,000 capped households would see no gain at all – while many others would likely be pulled into the cap.

With multiple items on Labour’s to‐do list, money is of course a stumbling block to social security reforms. Yet abolishing the cap requires a relatively small annual investment of £0.3 billion.3 It would cost £1.8 billion to peg LHA rates at the 30th percentile and £3.1 billion at the 50th percentile.4

It is likely to be Labour’s thinking that its house building plans will deliver a number of dividends: if an expanded housing supply drives down rents, this will help families directly, and it should also reduce the cost of housing‐related social security reforms. It will be important, then, to keep a close eye on progress on Labour’s housebuilding targets.

However, building houses takes time, and capped households cannot wait. The damage being done to these households, and to the 300,000 children living in them, is happening now. Labour must think not only long term but short term too: the wellbeing of these children demands it.