Housing benefit payments leave young Universal Credit recipients in St Helens more than £100 a month short of rent for a room in a shared house, new analysis shows.
Leading charities have called on the Government to rethink the "illogical and confusing" system, which they say leaves vulnerable young people – including care leavers – trapped in homeless hostels.
Universal Credit uses the Local Housing Allowance to calculate how much housing benefit claimants are entitled to, with rates based on the private rental market in the local area.
Under the system, most single people aged under 35 are only entitled to help towards the cost of a room in a shared house – known as the Shared Accommodation Rate, the lowest LHA band.
The average monthly price of a room in St Helens was £382 during the 12 months to September, the latest Office for National Statistics figures show.
But analysis by youth homelessness charity Centrepoint shows local Universal Credit claimants who receive the shared accommodation rate will only be entitled to £264 per month in 2020-21 – including a 1.7% increase scheduled for April.
At just 69% of the average rent, that would mean claimants have to find an extra £118 a month to be able to afford somewhere to live.
Rents were affordable under these calculations in just one of the 233 English authorities with available data – with young people facing a shortfall of £100 or more in 166 areas.
Centrepoint said prices may have increased since September, leaving young people in an even worse position.
Chief executive Seyi Obakin said it "defies logic" that under-25s are not entitled to greater help with their housing costs, regardless of their vulnerability.
"The current system means that many young people are ready to move on from care or a homelessness hostel but can’t," he added.
"The negative impact this has on young people, and the bed-blocking it creates, is simply unsustainable."
Some young people, such as care leavers aged 18 to 21 and over-25s leaving homeless hostels, are able to claim a higher rate for a one-bedroom property.
But, at £356, this rate also falls short, covering just 88% of the £404 per month needed to rent the average one-bedroom home in St Helens.
Sam Royston, director of policy and research at The Children's Society, said the "illogical and confusing" system leaves young care leavers facing a financial cliff edge on their 22nd birthday.
He called for the Government to exempt care leavers from the shared accommodation rate until they are 25, to give them a chance to create a stable home of their own.
The charities estimate it would cost £5.8 million to make the change nationally, and £3.7 million to allow hostel leavers to claim the higher one-bed rate before they turn 25.
A Department for Work and Pensions spokesman said around 900,000 people would see their benefit rise by an average of £10 in April.
He added: “This government continues to spend around £23 billion a year helping people with their housing costs and since 2011 have provided authorities with more than £1 billion in Discretionary Housing Payments to protect the most vulnerable.”
“We continue to spend £95 billion a year on working-age benefits.”