The Department for Work and Pensions (DWP) has announced that from October 2026, residents in supported housing and temporary accommodation will no longer face a reduction in income when they increase their working hours. This change, initially introduced under the previous Labour government led by Sir Keir Starmer, now falls under the responsibility of new Prime Minister Andy Burnham. The DWP estimates that 315,000 people will benefit from the revised Housing Benefit earned income disregards.
Ending the benefits cliff edge
The previous rules created a 'cliff edge' that discouraged benefit claimants from seeking employment or additional hours, according to the DWP. Under the old system, earning more often led to a pound-for-pound reduction in Housing Benefit, effectively trapping people in dependency. The new regulations ensure that taking a job or working more hours always results in higher net income than remaining on benefits. Sir Stephen Timms, DWP minister, said: 'The system we inherited was actively pushing some of the most vulnerable residents away from work rather than towards it. These changes fix that - ensuring residents can keep more of what they earn, so that taking a job or increasing hours always pays better than benefits.'
Details of the regulation
The Housing Benefit (Earned Income Disregards) Regulations 2026 were laid before Parliament on 6 July 2026 and come into force on 5 October 2026. The change applies specifically to those receiving Housing Benefit in supported, sheltered, or temporary accommodation. Housing Benefit can help pay rent for those who are unemployed, on a low income, or claiming benefits, though it is being gradually replaced by Universal Credit. New claims for Housing Benefit are only possible for individuals who have reached State Pension age or live in supported or temporary housing. The new rules increase the amount of earnings that are ignored when calculating Housing Benefit, allowing residents to keep more of their paycheck.
Government reform plans
This announcement fulfills a commitment made in the Autumn Budget and is part of a wider welfare reform plan aimed at removing barriers that trap people in dependency. Sir Stephen added: 'We are replacing that system with one that rewards work and ensures people keep more of what they earn, while protecting those who need it most.' The policy change is expected to have a significant impact on the financial well-being of vulnerable residents, allowing them to retain more of their earnings as they move towards financial independence. The DWP has indicated that further reforms to the welfare system are planned as part of the government's broader strategy to support employment and reduce poverty.
Political context
This rule change was originally developed under Sir Keir Starmer's administration but is being implemented by his successor, Andy Burnham. The transition of power has not altered the timeline, with the regulations coming into effect as scheduled. The policy is seen as a key part of the Labour government's commitment to welfare reform, ensuring that work always pays better than benefits for the most vulnerable in society.
