In its proposed housing allowance rates for 2024-25, the Department for Work and Pensions (DWP) said it will invest £7 billion over the next five years with people living in the most expensive areas set to see the biggest boost. The investment means 1.6 million private renters on Universal Credit or Housing Benefit will be around £800 better off a year on average.

Subject to the benefits cap, DWP said eligible renters of a two-bedroom property in Greater Glasgow could get up to £850 per month.

LHA rates are used to calculate Universal Credit and Housing Benefit payments for tenants renting from private landlords. The level of support is based on the area where the person lives and the size of their household. The rates have been frozen since April 2020, but in April this year, they will be reset to cover the cheapest 30% of rents in an area. This means rents should be affordable to people claiming Universal Credit or Housing Benefit.

Work and pensions secretary Mel Stride said: “Housing costs are the number one expense for families. This £1.2 billion boost to Local Housing Allowance, along with our landmark Back to Work reforms, reflects our fair approach to welfare – helping people into employment while protecting the most vulnerable with unprecedented cost of living support.”

Minister for disabled people, health and work Mims Davies said: “Keeping inflation down and supporting people to stay and progress in work is the best way we can bolster families’ finances and help them progress, but we know some are still struggling which is why we are providing this important extra help.

“This key boost to our housing support will see average renters around £800 better off. It is just one crucial part of our £104 billion package to help the most vulnerable which also includes an increase to benefits in line with inflation and our latest series of cost of living payments.”

Crisis chief executive, Matt Downie, added: “It cannot be understated just how vital this investment in housing benefit will be in helping to both prevent and end homelessness.

“In recent years, people receiving housing benefit have found it increasingly difficult to afford the soaring cost of rents. Giving housing benefit this crucial boost will make a real difference to people across Great Britain and will relieve some of the pressure facing people on the lowest incomes.

“We hope this investment will be maintained for the long term, so we can continue with our collective mission to end homelessness for good.”

However, the Resolution Foundation previously warned that the move was a “temporary thaw” and thousands more households will run up against the benefit cap which will not rise along with benefits this April.

In a statement, the Resolution Foundation said: “We estimate that a couple with two children in receipt of the full Universal Credit award will hit the benefit cap in more than four-in-five (83%) local areas come April, up from just over half (53%) today.”