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

New regulations implemented today aim to eliminate the abrupt loss of income experienced by residents in supported housing and temporary accommodation when they increase their working hours. This initiative is part of the Government’s broader strategy to transition from a welfare state to a working state, which includes a significant £3.5 billion investment in employment support and the most substantial reforms to youth employment seen in a generation, aimed at creating nearly one million job opportunities for young people.

More than 325,000 residents living in supported housing and temporary accommodation will benefit from these new rules, which ensure that they will no longer experience a reduction in income when they take on additional work or increase their hours. These changes come into effect today, Monday 5 October 2026.

Addressing the Benefits System’s Inconsistencies

The previous system, inherited by the current Government, often placed individuals in supported housing and temporary accommodation in a challenging position. Many relied on Universal Credit for daily living costs, while their rent was covered separately by Housing Benefit. These two systems operated under different rules regarding earnings, with those receiving Housing Benefit facing stricter limits compared to their counterparts on Universal Credit. Consequently, residents who sought employment or increased their hours faced a quicker reduction in their Housing Benefit, leaving them financially worse off despite earning more, and deterring them from pursuing work opportunities.

The newly implemented reforms aim to rectify this situation, ensuring that individuals living in supported housing and temporary accommodation—particularly the nearly 50,000 young people entering the workforce—are more adequately rewarded for their efforts to gain employment or enhance their working hours.

Government Commitment to Employment and Independence

As part of the Government’s pledge to facilitate a shift from a welfare system to one that encourages work, the regulations now align the calculation of Housing Benefit with that of Universal Credit. This adjustment strengthens work incentives for over 325,000 residents in supported housing and temporary accommodation.

Prime Minister Andy Burnham commented on the changes, stating, “People should never have to choose between keeping a roof over their head and being able to work. The system has previously disadvantaged those striving for better opportunities, particularly young individuals who found themselves worse off as they earned more.” He added that this reform represents a sensible change that allows people to retain a greater portion of their earnings, contributing to a progressive welfare reform aimed at assisting families in achieving stability and financial independence.

Encouraging Employment and Building Resilience

Sir Stephen Timms, Minister for Social Security and Disability, emphasised the importance of these reforms, stating that the previous system had discouraged vulnerable residents from seeking employment rather than supporting their transition into work. He noted, “We are correcting this, ensuring that residents can retain more of their earnings and that working additional hours results in a better financial position than remaining on benefits.” He described this as a commitment made during the Autumn Budget, now being realised as part of a comprehensive effort to reform a welfare system that has kept many in dependency for far too long.

Homelessness Minister Florence Eshalomi highlighted the Government’s investment of over £4 billion aimed at eradicating homelessness, asserting that employment plays a crucial role in many individuals’ recovery journeys. “This intervention is vital in assisting people in securing stable employment or increasing their earnings, ultimately fostering long-term independence,” she stated. The Government also aims to ensure that safe and stable placements remain available for those in temporary accommodation while addressing the illegal use of bed-and-breakfast facilities for families and improving access to essential support services.

Support for Young People and the Drive for Employment

Today’s reforms coincide with previous measures aimed at assisting individuals on disability benefits who wish to work. The adjustments to Universal Credit tackle the disincentives that previously hindered employment opportunities while providing support to sick and disabled individuals previously denied such assistance. The introduction of the Right to Try initiative allows individuals to explore work without the fear of immediate reassessment.

Seyi Obakin, Chief Executive Officer at Centrepoint, praised the changes as a significant victory for young people, commending the Government for facilitating this transformation. “For too long, young people in supported housing, particularly those at the outset of their careers, have faced barriers that hindered their aspirations,” he remarked. “From 5th October, young individuals will be able to retain a larger portion of their earnings, allowing their additional hours to have a tangible impact. This change empowers young people to pursue their career ambitions and build their desired futures.”

Long-term Benefits of Employment for Vulnerable Groups

Emma Haddad, CEO at St Mungo’s, expressed her organisation’s long-standing advocacy for these reforms, welcoming this pivotal moment in dismantling barriers to employment for those in supported accommodation. “For many, work is essential for fostering financial resilience and independence, as well as maintaining stable housing. The previous system often made work feel unattainable for those in supported housing due to the harsh withdrawal of benefits as earnings increased,” she explained. “This change will enable more individuals to leverage their skills, which positively impacts their health, wellbeing, and community connections, all crucial elements in recovering from homelessness.”

These reforms are part of a wider investment of £3.5 billion aimed at providing employment support for sick or disabled individuals, striving to eradicate the culture of individuals being sidelined from the workforce. The Government’s Connect to Work programme will offer personalised assistance to help 300,000 people secure employment.

In summary, the new Housing Benefit (Earned Income Disregards) Regulations 2026, which were presented to Parliament on 6th July 2026 and take effect today, introduce five new earned income disregards for working-age Housing Benefit claimants in supported housing and temporary accommodation. The values of these disregards will be updated annually, ensuring that no group is disadvantaged by these changes; any variations in immediate financial benefits will reflect the existing structures of Universal Credit and Housing Benefit tapering.