Layered halide perovskites (LHPs) are emerging semiconductor materials due to their superior environmental stability compared to traditional halide perovskites. While LHPs have tunable optoelectronic properties, quantum and dielectric confinement effects due to organic spacer layers limit their application. Recent attempts to mitigate the high exciton binding energy (Eb) of LHPs by organic cation engineering have been demonstrated, however systematic studies to decouple the influence of interlayer spacing and molecular dipole are very limited. Here, we designed a new class of organic spacer employing a malononitrile (MN) functionality giving a calculated dipole moment of 7.9 D. Malononitrile phenethyl ammonium (MNPEA) was successfully incorporated into lead iodide-based LHPs thin films and as single crystals. Comparing the MNPEA-based LHP to phenethyl ammonium (PEA) and biphenethyl ammonium (BPEA), selected as reference cations to elucidate the influence of increased dipole moment while excluding the contribution of increased interlayer distance, clarified the effect of the large organic dipole. Binding energies, Eb, estimated by temperature-dependent photoluminescence spectroscopy for MNPEA2PbI4, PEA2PbI4 and BPEA2PbI4 were 122, 354 and 183 meV, respectively. Moreover, the similar interlayer spacing of BPEA2PbI4 and MNPEA2PbI4 (21.04 Å and 21.36 Å, respectively) confirms the importance of dipole on tuning the optoelectronic properties. Photovoltaic devices with n = 1 LHPs demonstrated a higher fill factor and open circuit voltage with MNPEA2PbI4 compared to the reference layered perovskites likely due to the favored charge dissociation and transport afforded by the malononitrile-based cation.