New Regulations Allow Supported Housing Residents to Retain More of Their Earnings

Residents in supported housing and temporary accommodation will soon benefit from significant changes to the welfare system, which aim to eliminate the previous “cliff edge” loss of income associated with increasing work hours. These new regulations, which will come into effect in October, are set to assist approximately 300,000 vulnerable claimants.

Transforming Housing Benefit Regulations

Under the previous system, individuals in supported housing faced a difficult choice: remain unemployed or risk losing essential housing support by taking on more work. This was primarily due to the disparity between the work allowances of Universal Credit and Housing Benefit, with the latter providing less generous terms. The result was a system that inadvertently trapped many in a cycle of dependency on benefits instead of encouraging them to seek employment.

Some landlords even discouraged tenants from pursuing job opportunities, fearing a potential decrease in rental income. Recognising the need for reform, the Government is now changing the calculation of Housing Benefit to align it more closely with Universal Credit. This adjustment is expected to incentivise work for approximately 315,000 individuals when it is implemented in October 2026.

Government Commitment to Supporting Vulnerable Residents

Sir Stephen Timms, Minister for Social Security and Disability, emphasised the importance of these changes. He stated that the inherited system was counterproductive, actively pushing vulnerable residents away from the workforce. The new regulations are designed to ensure that residents can retain a greater portion of their earnings, making it more financially beneficial to take up employment or increase working hours.

This initiative is part of a broader commitment to reform the welfare system, as outlined in the Government’s Autumn Budget. It aims to dismantle barriers that have historically kept people dependent on benefits, replacing them with a system that rewards work and allows individuals to keep more of their income while still safeguarding those in need.

Complementary Measures to Enhance Employment Opportunities

The recent announcements complement earlier initiatives aimed at assisting individuals on disability benefits who wish to enter the workforce. The rebalancing of Universal Credit has addressed the disincentives that previously discouraged work, alongside the introduction of Right to Try legislation, which permits sick or disabled individuals to explore job opportunities without the immediate fear of reassessment.

Additionally, the Government is launching the Connect to Work programme, which provides tailored local support to help 300,000 people secure employment. This initiative will be further bolstered by the deployment of 1,000 Pathways to Work advisers, specifically aimed at assisting those who were overlooked by the previous administration.

Details of the New Earned Income Disregards

The Housing Benefit (Earned Income Disregards) Regulations 2026, which were laid before Parliament on 6th July 2026, will come into force on 5th October 2026. This legislation introduces five new earned income disregards for working-age Housing Benefit claimants in supported housing and temporary accommodation. These disregard values will be updated annually to ensure they remain relevant and effective.

Importantly, no group will be negatively impacted by these changes. Any variations in immediate financial outcomes will reflect the existing tapering systems of Universal Credit and Housing Benefit, ensuring a smooth transition for those affected.