Britain’s housing benefits bill to hit record £38.8bn as Labour set to fall short on 300,000 building target

Britain’s housing benefits bill is forecast to reach a record £38.8billion in 2026-27 as soaring rents and a chronic shortage of homes force millions more people to rely on state support.

Department for Work and Pensions (DWP) forecasts show the figure will mark the highest level in real terms since records began in 1970.

Taxpayer spending on housing support is set to rise by a further £913million this year alone.

A record 5.95 million people across England, Wales and Scotland are expected to receive housing support this year, representing an increase of 1.2 million since 2019-20.

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The figures highlight the mounting pressure facing households struggling to secure affordable accommodation without Government assistance.

Private sector rents have surged by 35 per cent since the pandemic, according to Office for National Statistics data.

Sir Keir Starmer’s manifesto pledge to build 1.5 million homes during this parliament is also facing growing scrutiny as construction levels continue to fall.

Housebuilding dropped to its lowest level in a decade last year, while planning approvals declined by 27 per cent to levels not seen since the early 2010s.

The Prime Minister had promised to deliver a major expansion in housebuilding aimed at improving affordability and increasing access to homeownership.

However, the gap between housing demand and supply continues to widen, with rising property costs leaving many households dependent on renting for longer.

Lord Best, co‑chairman of the All‑Party Parliamentary Group on Housing and former head of the Affordable Housing Commission, warned that insufficient housebuilding is pushing more people into the benefits system.

He said Labour is unlikely to hit its 300,000‑homes‑a‑year target without a major shift in market conditions.

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“They are not going to get up to 300,000 unless some miraculous change takes place,” he said, calling the outlook “pretty gloomy”.

Lord Best said high construction costs were deterring developers, with the combined price of land and building work often exceeding achievable sale values.

He described the current market as “a fallow period” for the housing sector.

He also highlighted the growing cohort of long‑term renters approaching retirement, warning that more people are renting for life while fewer are buying.

“There are more people renting and fewer people buying their own homes,” he said.

“That is a very worrying long‑term trend because by the time people get to retirement, their income halves but their rent keeps going up, so they're on housing benefits before you know it."

DWP defended the Government’s housing strategy and said ministers were working to address shortages and rising rents.

A spokesman said Labour was "fixing the broken system we inherited" through measures designed to increase housing supply, and pointed to the party’s commitment to build 1.5 million homes, describing it as "the biggest boost to social and affordable housing in a generation".

The DWP also highlighted welfare reforms which it said are projected to save £1.9billion by 2030-31.

Despite those measures, official forecasts indicate the national housing benefits bill will continue rising and could reach £40billion by the end of the decade.

More than a third of all housing benefits spending currently goes directly to private landlords.

Buy-to-let landlords are expected to receive £13.4billion this year to house benefit claimants, marking the largest payout to the private rented sector in 14 years.

The rising cost has been linked to the continuing shortage of social housing and the growing number of households relying on privately rented accommodation.

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