Three in five private renters cannot afford living costs, with high rents a key reason. It’s time to fix our broken housing model and make our homes more affordable.
The cost of living crisis means that paying essentials such as rent or mortgages is becoming increasingly difficult for many households. While headline inflation appears to have peaked, nearly everyone has been hit by a sharp rise in housing costs.Social tenants face rising rents 7% next year 3 million mortgage households average annual growth £3,000 By the end of 2023/24.Estimated Private Rent 6.5% increase In 2023, in a 12% increase in rent For new leases within the 12 months prior to October 2022.
put it all together 8% of properties are affordable Applies to people receiving housing assistance.with Section 21 of‘No-fault’ evictions still legal, No wonder 300,000 families may be homeless By next Christmas, a 32% increase since 2020.
Private renters have been hit especially hard in recent years, rent forecast It will rise by 10.0% between April 2020 and April 2023. If pre-pandemic trends continue, rents will rise by only 4.9%, raising the disposable income of private tenants in the bottom quintile of income by 3.2% (£330 per annum). In this case, more than 70,000 households would be able to lead a decent life.
Figure 1: Low-income households would be 3.2% better off if rent increases remained at pre-pandemic averages
Rising housing costs are only one factor, although it is a significant contributor to falling living standards. In April 2022, with inflation approaching double digits, 9.7 million households (34%) cannot afford a decent standard of living, as measured by minimum income standard. Even with an increase in Social Security next month, and taking into account the cost of living, the number of households unable to afford a decent standard of living would still increase to 11.1 million (39%). This includes 50% of families with children and 85% of single parents. By April 2023, around 70% of social rental sector households will be earning less than the minimum income standard, as will 58% of private rental sector households. Twenty-six per cent of owner-occupiers with mortgages will also be unable to cover costs, which is a 7 per cent increase from April last year and the largest increase of any tenure group.
Families that already lacked a decent standard of living also fell further into economic hardship. These households will be on average £650 a month below the minimum income by April this year, an increase of £70 a month on the same period last year. For families with children, the average gap is £870 a month, up from £780.After a decade of stagnant wages and cuts to Social Security, the crisis is forcing New record Many families turn to food banks for support.
The inadequacy of the welfare safety net must be urgently addressed. That’s why NEF is proposing a bold new approach to social security. By combining common elements with means-testing systems, National Living Income Every family will be supported if their income falls, with faster support and a more generous safety net. By aligning work and personal allowances, no one pays taxes or withdraws benefits until a decent standard of living is achieved. Reforming the social safety net to boost incomes is an important step in addressing poverty and the cost of living crisis.
However, in order to ensure that families can afford a decent standard of living, it is crucial to reduce basic costs, including housing. In England in 2021/22, social tenants and owner-occupiers with mortgages will spend 27% and 22% of household income on rent respectively. But those who have been facing the highest housing costs are private renters, who make up about a third of their income.
Figure 2: Private renters have faced the highest housing costs as a proportion of household income in recent years
also, More than half (53%) The poorest private tenants spend at least 40% of their income on rent.this of‘According to the OECD definition, the rate of housing overburden is one of the highest in the OECD, about 3 times that of Germany or France.
Figure 3: UK private rental housing overburden rate is one of the highest in the OECD
At the heart of rising housing affordability in the private rental sector is a pernicious combination of rapidly rising rents and a freeze in housing-related social security payments. The Local Housing Allowance (LHA), the part of housing support that covers private sector rents, was frozen between April 2016 and April 2020. This contributed to an 8 percentage point increase in the housing overburden rate for private renters between 2016 and 2019. Recalibrating the LHA 2020 slightly lessened the burden, but the post-2020 rent increase was greater.
In our new analysis, we find that unfreezing the LHA in next week’s budget would raise an average of £5.20 a year for 1.8 million households, significantly reducing the risk of homelessness for these households, at a cost of £1bn a year. The total cost includes the small number of new households who have received universal credit as a result of the policy change, which also makes them eligible for a living allowance of £900 per household for the current financial year.
The Chancellor must unfreeze the LHA’s budget as a matter of urgency. But in the long run, a complete overhaul of our broken housing system is needed.The size of the private rental sector—characterized by high rents and low security of tenure—has More than doubled as a percentage of our total housing stock since the late 1980s, while the overall share of social housing has almost halved since the introduction of the right to buy in 1980. NEF analysis shows we’re only building 7% of the social housing we need Following reforms introduced in 2018. As a result of this imbalance, 8.5 million households experienced housing needs — Manifested by homelessness, overcrowding and living in unaffordable, poor quality and unsuitable housing. Of these households, 4.2 million have the most urgent needs that can best be addressed through the enhanced affordability and security of tenure that social leasing brings.
Figure 4: The proportion of rental properties in UK society has almost halved since the introduction of the right to purchase, while the proportion of PRS properties has almost doubled since the early 2000s
NEF Homeland AllianceSolutions are being developed to fix our broken housing model, with a focus on how we can upgrade and Reuse of accommodation in the private rented sector as housing for social rents . Doing so would increase the supply of the housing we most desperately need – social housing – while providing an exit strategy for landlords wishing to leave the market.It can also help provide warmer, safer homes if linked to the goal of upgrading energy-inefficient homes governmentWant the private rental sector.
Repurposing 800,000 private rental properties for social housing would reverse the overall ratio of the private and social housing sectors. It increased the size of the social rental sector from 16.5% to 19.6% of the housing stock and reduced the size of the private rental sector by about the same amount. For a median household that is no longer renting privately but now rents, the income after housing costs would increase by £450 a year. They will also benefit from the stability provided by security of tenure.
As well as saving on rent, most private renters can also reduce their energy bills if they rent from a social landlord, as such properties have higher energy efficiency requirements. 2.4 million private rental homes more than half of the total, does not meet the energy efficiency standard rating of‘C’ – which government Say it expects all properties to be satisfied. 990,000 (22.9%) did not meet the decent dwelling standards, which ministers said they wanted to extend to the private rented sector. Tenants in EPC of‘E’ properties – the current minimum standard for the private rental sector – will save on average £850 If their property is upgraded to meet these raised minimum standards.
Upgrading and repurposing these homes requires an upfront investment but could significantly reduce annual housing support costs (housing benefits and the housing component of the Universal Credit) by £1 billion a year.The UK is expected to spend £29 billion this yearAbout housing support. 2020 1.4% of GDP is spent on this , while the OECD average is only 0.3%. NEF analysis shows that the government Will spend five times as much to subsidize private rents Income earned through housing support will exceed affordable housing grants for the next four years.Investing in rebalancing our housing stock will reduce housing support costs, address housing needs and homelessness, and Reduce £1.6 billion spent annually by local authoritiesRegarding temporary accommodation.
The chancellor must unfreeze the LHA in his budget to prevent pushing more families below minimum income and making thousands more homeless. In the long run, investing in the ability of social landlords to upgrade, acquire and repurpose private rental housing to create a new generation of social housing offers a clear path out of the housing and cost of living crisis.
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