Liverpool Faces Housing Allowance Cuts as New Bill Targets Benefit Caps

A bill introduced to the state legislature on Monday would cap Local Housing Allowance payments at the 30th percentile of local market rents, a change that policy analysts say could directly affect an estimated 4,200 Liverpool households currently renting in the private sector. The Housing Support (Market Alignment) Bill 2026, assigned to the Housing and Local Government Committee, aims to reduce annual state expenditure on housing benefits by an projected £18 million, according to the bill’s fiscal note.

The legislation responds to a two-year rise in Liverpool’s median private rent, which the Liverpool City Council’s latest housing survey pegs at £895 per month-up 11% since 2024. Under current rules, Local Housing Allowance covers up to the 50th percentile of market rents. The proposed cap would lower that to the 30th percentile, meaning the maximum payout for a two-bedroom property would fall from £950 to approximately £780 per month. The Liverpool Combined Authority’s economic unit projects that 1 in 4 private renters in the city rely on the allowance in full or in part.

What the change means for renters and landlords

For Liverpool residents like those in the Kensington and Toxteth wards-where rental demand has risen sharply since the opening of the Liverpool Innovation Park in 2025-the cap could leave a gap between benefit payments and actual rent. The Liverpool Citizens Advice Bureau has reported a 40% increase in housing-related inquiries since January, with many callers already struggling to meet current rent levels. One local housing advocate, who asked not to be named due to the political sensitivity of the bill, said that without a supplementary local hardship fund, tenants could face increased arrears or eviction notices.

The bill does include a transition clause: existing benefit recipients would see no change until their tenancy renewal date, and the cap would not apply to supported housing for elderly or disabled residents. Landlord groups, including the Merseyside Residential Landlords Association, have argued that the cap could deter new rental investments in the city, particularly in the Baltic Triangle and Knowledge Quarter areas, where new-build rents already exceed the proposed cap.

Budget impact and next steps

The state treasury’s accompanying budget paper states that the savings-£18 million in the first financial year, rising to an estimated £24 million by 2028-are earmarked for a new statewide affordable housing construction fund. Liverpool, which has a waiting list of 9,600 for social housing, is expected to receive a share of that fund, though the exact allocation has not been published. The Liverpool Housing Forum, a coalition of 14 community groups, has called on the committee to hold a public hearing in the city before the bill moves to a vote, scheduled for late September.

The bill’s committee hearings begin July 24 in the state capital. Liverpool’s three representatives on the committee have not publicly declared their positions. For now, residents like those in the Granby and Wavertree neighbourhoods, where the allowance is used by roughly 30% of private tenants, are left waiting to see whether the state’s cost-saving measure will tighten the local housing market further.