New market analysis finds 98% of rental homes in England are unaffordable to thousands of households

According to SimplyPhi’s Q3 2025 Regional Housing Market Report, average rents across all nine regions of England continue to outpace Local Housing Allowance (LHA) rates. The LHA rate is the maximum amount of housing benefit a private renter can receive from the government. SimplyPhi warns that the growing gap between market rents and LHA rates (the Affordability Gap) is pushing more families and low-income earners towards risks of homelessness at a time when councils face mounting pressure on their spending.

The Affordability Gap
There is a significant monthly shortfall between average market rents and LHA rates across England, ranging from £412 to £1,229 per month. This gap means that LHA does not cover the average cost of renting, making it unaffordable and putting households at increasing risks of homelessness.

This quarter’s report found that across England, only 1.7% of private rental homes on the market were available at LHA rates, equivalent to just 1,041 out of 75,998 properties, representing a 10% decline in the number of affordable supply compared to last quarter.

Overall, the Affordability Gap has shown modest shrinkage in several regions this quarter. However, this likely reflects a slight softening in rental growth rather than improvements in LHA rates, which remain frozen since April 2024. Rent inflation over the past few years has far outpaced adjustments to the LHA rates, which is supposed to be set at the 30th percentile of market rents.

SimplyPhi reports that unsurprisingly London remains England’s most expensive and unaffordable rental market with the average rent of £3,095 pm and an average LHA rate of £1,796 pm. SimplyPhi notes that the gap has decreased slightly in the last quarter by £120 per month, but the shortfall crucially remains unaffordable for most households, especially those on low incomes.

Affordable Supply
SimplyPhi’s Q3 2025 report shows 26,064 properties were available to rent in London, the highest across all regions, however, only 265 (1%) were available to rent at LHA rates, the lowest across the country. Notably, there were 4,517 (5%) fewer properties available to rent in London compared to the previous quarter. This is likely a result of the Private Rented Sector (PRS) market contracting due to uncertainty surrounding the impending Renters’ Rights Bill, new tax implications and the abolition of Section 21.

Impact of LHA Freeze and the Rise of Temporary Accommodation
The continued freeze of LHA rates for the 2025/26 financial year creates a policy-driven poverty trap, widening the gap that low-income families must bridge to secure housing. These structural shortfalls continue to affect low-income households and those relying on benefits from being able to rent in the PRS market, pushing households into the risk of homelessness and reliance on Local Authority-funded Temporary Accommodation (TA).

Last year Local Authorities spent £2.8 billion on TA, a 25% increase year-on-year. With a record 131,140 households, including more than 169,000 children, now living in TA in England, Local Authorities remain under immense pressure to move people into better quality, affordable homes and reduce the financial burden they are suffering due to over-use of expensive nightly let accommodation including use of hotels and Bed & Breakfasts.

“The lack of affordable housing severely limits the ability to secure suitable homes pushing more families into expensive, overcrowded, or unsuitable housing.

“This quarter’s data highlights the housing emergency is far from receding and in fact is accelerating, with the affordability gap widening and TA usage hitting record highs. The scarcity of affordable homes demands urgent systemic intervention and a new approach to housing provision. Coordinated, large-scale solutions between key stakeholders including institutional investment are needed to strengthen affordable supply and close the affordability gap.”

Omar Al-Hasso, CEO at SimplyPhi