The government will also provide £20m of funding for schemes to support people at risk of homelessness to access and sustain tenancies in the private rented sector.
The £125m targeted affordability funding is likely to be welcomed by landlords who have been reporting increased arrears among tenants accessing Universal Credit.
It will support Housing Benefit and Universal Credit claimants living in areas where private rents have been rising fastest.
The government will increase some Local Housing Allowance rates by increasing Targeted Affordability Funding by £40m in 2018‑19 and £85m in 2019‑20.
“This will increase the housing benefit awards of approximately 140,000 claimants in 2018‑19, by an average of £280, in areas where affordability pressures are greatest,” according to the government.
Delivering his Budget speech, Hammond added: “We also want to help low-income households in areas where rents have been rising fastest. In the long run, the answer lies in increasing the amount of housing available.
“But in the meantime, the best way to help them is by increasing the rate of support in those areas where rents are least affordable.”
The government has also launched a fintech competition to make rent history count toward mortgage affordability and the Chancellor’s speech in full.