New Income Rules for Supported Housing Residents
New regulations implemented today aim to eliminate the abrupt loss of income experienced by individuals residing in supported housing and temporary accommodation when they increase their working hours. This initiative is part of a broader government strategy to transition from a welfare state to a working state, which includes a substantial £3.5 billion investment in employment support and significant reforms aimed at youth employment, with the goal of creating nearly one million job opportunities for young people.
Over 325,000 residents living in supported housing and temporary accommodation will benefit from these changes, as they will no longer see their income diminish upon increasing their work hours. Previously, individuals in these situations often relied on Universal Credit to cover their daily living expenses, while their rent was supported through Housing Benefit. However, the criteria governing earnings and benefits were inconsistent between the two systems, placing undue pressure on residents.
For those receiving Housing Benefit, the thresholds for earnings were less accommodating compared to those who depended solely on Universal Credit. Consequently, some residents found themselves penalised when they sought employment or increased their working hours, leading to a situation where they ended up worse off despite earning more. This created a disincentive for many to pursue work opportunities, effectively trapping them in a cycle of dependency on benefits rather than supporting their journey toward financial independence.
Enhancing Work Incentives
The newly established reforms are designed to ensure that residents in supported housing and temporary accommodation—including approximately 50,000 young individuals entering the workforce—are appropriately rewarded for their employment efforts. The adjustments to Housing Benefit calculations will now correspond with the Universal Credit framework, thereby reinforcing work incentives for the over 325,000 individuals affected.
Prime Minister Andy Burnham commented on the significance of the reforms, stating: “Individuals should never have to choose between having a secure home and being able to work. Yet, the existing system has been unfavourable to those striving to improve their circumstances, particularly young people embarking on their careers who found themselves financially penalised for earning more.”
He expressed that these common-sense changes will enable individuals to retain a larger portion of their earnings, illustrating what progressive welfare reform entails: assisting people in securing employment while providing families with the stability and freedom they require to thrive.
Addressing Long-standing Inequities
Sir Stephen Timms, Minister for Social Security and Disability, echoed the sentiments of the Prime Minister, asserting that for too long the system had the opposite effect of what was intended. It discouraged some of the most vulnerable residents from seeking work, rather than facilitating their transition into employment.
He reaffirmed the government’s commitment to ensuring that residents retain more of their earnings and that working additional hours results in a more advantageous financial situation compared to remaining on benefits. This reform is a fulfilment of a promise made in the Autumn Budget and forms part of a larger initiative aimed at overhauling a welfare system that has, for too long, perpetuated dependency.
Homelessness Minister, Florence Eshalomi, highlighted the government’s investment of over £4 billion to eradicate homelessness permanently, emphasising the critical role that employment plays in many individuals’ recovery journeys. She stated that this intervention is vital in supporting people to secure work or improve their earnings, thereby fostering lasting independence.
Support for Young People and Barriers to Employment
Seyi Obakin, Chief Executive Officer at Centrepoint, hailed these changes as a landmark victory for young people, commending the government for facilitating this reform. He noted that for too long, young individuals in supported housing, particularly those at the beginning of their careers, were hindered by a system that penalised them for striving to work harder.
Obakin shared that young people often felt “trapped,” unable to increase their hours, switch jobs, or save money without experiencing immediate financial repercussions, especially as the cost of living continued to rise. With the new regulations effective from today, young residents in supported housing can now retain a higher percentage of their earnings, thereby allowing their additional hours to contribute to their financial wellbeing.
Broader Employment Support Initiatives
Emma Haddad, CEO at St Mungo’s, welcomed this significant reform, which dismantles barriers to employment for individuals residing in supported accommodation. She emphasised that work is crucial for building financial resilience and independence, yet for many in supported housing, employment opportunities have often seemed out of reach.
Haddad explained that while it is reasonable for benefits to decrease as income rises, the previous system’s steep withdrawal of support left many worse off for working more hours. She echoed the importance of this change, particularly for those who benefit from training and employment services, reinforcing that such opportunities positively impact health, wellbeing, and community connections—essential steps in recovering from homelessness.
In addition to these reforms, the government has also earmarked £3.5 billion for employment support specifically aimed at sick and disabled individuals, striving to eradicate the culture of individuals being dismissed from work and ensuring they receive personalised assistance to help them secure employment through the Connect to Work programme.
Implementation of the New Regulations
The Housing Benefit (Earned Income Disregards) Regulations 2026, which were introduced in Parliament on 6th July 2026, officially took effect on 5th October 2026. These regulations introduce five new earned income disregards for working-age Housing Benefit claimants residing in supported housing and temporary accommodation. It is important to note that the disregard values will be updated annually, ensuring that no group is disadvantaged by these changes, with any immediate financial variations reflecting the existing tapering structures of Universal Credit and Housing Benefit.