The Treasury manages public spending within two ‘control totals’ of about equal size:

  • departmental expenditure limits (DELs) – mostly covering spending on public services, grants and administration (collectively termed ‘resource’ spending) and investment (‘capital’ spending). These are items that can be planned over extended periods.
  • annually managed expenditure (AME) – categories of spending less amenable to multi-year planning, such as social security spending and debt interest.

Social security and tax credits together are the biggest source of AME spending. Housing benefit is one of the larger elements of welfare spending. It is an income-related benefit to help households pay their rent. It is available to people on low incomes – from benefits or work – who rent their homes in the private- or social-rented sectors. Unlike many benefits, there is no set amount paid to an individual for housing benefit. The amount received depends on a measure of ‘eligible’ rent – e.g. local housing allowance rates in the private sector – and other household circumstances. These include household income, whether there are any non-dependants, whether there is deemed to be a spare room in the home, and the age and disability status of those in the household.

Key determinants of spending on housing benefit are household composition, employment/unemployment, earnings and rents. Working-age housing benefit is one of the elements of welfare spending that will be replaced by universal credit over the coming years. Pensioner-age housing benefit will remain separate. Currently, we produce our forecasts for the benefits affected by UC by first assuming a no-UC counterfactual (i.e. the legacy benefits continue as before) then adding the marginal cost of introducing UC. In outturn years, in order to enable monitoring of monthly spending against our forecasts, we switch to an ‘actual cost’ presentation of spending showing legacy benefit spending net of the impact of the UC rollout. These accounting switches appear as line breaks between the last actual cost and first no-UC counterfactual data points in the charts below. Our January 2018 Welfare trends report set out how we forecast spending on UC and the legacy benefits in more detail.

In our latest forecast, overall outturn spending on housing benefit was estimated to be £21.9 billion in 2017-18, with around £0.8 billion of working-age spending having been ‘lost’ to UC. We expect overall housing benefit spending in 2018-19 to total £23.4 billion, with 4.6 million recipients paid an average of £5,035 each. That would represent 2.9 per cent of total public spending and 1.1 per cent of national income.

This can be split into spending inside and outside the welfare cap – only spending associated with people in receipt of jobseeker’s allowance or equivalent households in receipt of UC is outside the cap. In our latest forecast we expect housing benefit spending subject to the cap to total £21.2 billion and spending outside the cap to total £2.2 billion in 2018-19.

  • Latest forecast

    Housing benefit spending subject to the welfare cap is forecast to rise by 1.4 per cent in cash terms between 2018-19 and 2022-23. As this is considerably less than our forecast for nominal GDP growth over that period, this represents a fall of around 0.1 per cent of GDP. This fall is almost entirely driven by a reduction in average awards relative to average earnings. This largely reflects the freeze in working-age benefit uprating and policies that place additional burdens on social sector landlords.

    Housing benefit spending outside the welfare cap is set to rise by 15.2 per cent in cash terms, slightly higher than our forecast for nominal GDP growth. This rise is driven by an increase in the caseload, reflecting an increase in the jobseeker’s allowance caseload (on a no-UC counterfactual basis) in the near term due to the lone parents’ obligation (one effect of which is to move some claimants from income support to jobseeker’s allowance). This more than offsets the falls in average awards discussed above.


    Our March 2018 forecast revised down spending on housing benefit inside the welfare cap by just £0.1 billion in 2022-23 relative to our November forecast. On average over the whole forecast period, spending increased by £0.1 billion.

    Housing benefit (inside the welfare cap): changes since previous forecast


    Our March 2018 forecast for housing benefit outside the welfare cap revised spending down by between £0.1 billion and £0.2 billion over 2018-19 to 2022-23 relative to our November forecast. These revisions were largely due to a correction in the treatment of policies announced at Autumn Budget 2017.

    Housing benefit (outside the welfare cap): changes since previous forecast


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  • Previous forecasts

    Our forecast for housing benefit spending is sensitive to changes in our economy forecast and to policy changes. For example, the large downward shift in our spending forecast in July 2015 reflected the announcement of policy measures that are expected to reduce spending on housing benefit, some of which are discussed in the policy costing section. The upward shifts in housing benefit spending outside the welfare cap in November 2016 were partly a knock-on consequence of the upward revision to our unemployment forecast.

    Our June 2015 Welfare Trends Report explained some of the factors behind previous errors in our housing benefit forecasts:

    The errors here had been associated with three inter-related developments in the economy:

    • The share of the population renting had continued to rise faster than forecast, which may have been associated with house prices remaining high relative to incomes and reduced post-crisis supply of high loan-to-value and loan-to-income mortgages.
    • Employment growth had been much stronger than expected, but earnings growth had been much weaker. As a result, the number of people in-work but earning sums that would leave them eligible for housing benefit had been higher than expected. (It is also possible that take-up could have risen).
    • Rent inflation, as measured in housing benefit administrative data, had been higher than expected – partly driven by compositional changes. This interacted with subdued earnings to increase the eligible population further.

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  • Policy measures

    Since our first forecast in June 2010, the Coalition and Conservative governments have announced over 35 policy measures affecting our forecast for housing benefit spending. The original costings for these measures are contained in our policy measures database and were described briefly in the Treasury’s relevant Policy costings document. For measures announced since December 2014, the uncertainty ranking that we assigned to each is set out in a separate database. For those deemed ‘high’ or ‘very high’ uncertainty, the rationale for that ranking was set out in Annex A of the relevant Economic and fiscal outlook.

    Most measures have reduced housing benefit awards. Some of the largest include:

    • Switching to CPI indexation for Local Housing Allowance from 2013-14 (June Budget 2010).
    • Setting Local Housing Allowance at the 30th percentile of local rents from 2011-12 (June Budget 2010).
    • Increasing Local Housing Allowance by 1 per cent a year for two years from 2014-15 with provision for high rent areas (Autumn Statement 2012).
    • Reducing social sector rents by 1 per cent each year for 4 years from 2016-17 (July Budget 2015).
    • Freezing Local Housing Allowances for 4 years from 2016-17 (July Budget 2015).

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