The poor in London: priced out?
Last week, Darren Johnson, one of the Green Party’s members in the London assembly, claimed that new housing benefit figures showed rising numbers of low income families being priced out of Inner London. The changes are striking, but there are emerging differences within areas as well as between them.
In the 12 months to November 2012 (the most recent data available), the number of private rented sector claimants across London increased by 3,220, or around 1.2%. In Inner London there was a decline of around 3.3% (or 3,440 claimants) and an increase in Outer London of 3.86% (6,660). But this hides more interesting trends. A clearer picture of what is happening can be seen if we look at the sub-regions used in London’s Poverty Profile, as seen in figure 1 below.
Figure 1: The percentage change in the number of private rented sector housing benefit claimants in London’s sub-regions between November 2011 to November 2012*
The fall in Inner London, then, represents a large decline in the Inner West of 8.4% and a small decline of -0.5% in the Inner South and East. But this also obscures what has been going on – parts of the Inner East and South such as Islington and Tower Hamlets have seen large decreases of 8% and 7% respectively, whereas Haringey and Lewisham have seen small increases. In Westminster in the Inner West where the decrease was 12%, this amounts to a fall of over 1,000 claimants (the next highest fall was Kensington and Chelsea at 640). The outer areas of the city all saw increases.
Darren Johnson, London Assembly Member suggests this change is down to the LHA caps. In April 2011 two new Local Housing Allowance (LHA) caps were introduced that apply to housing benefit claimants in the private rented sector. One was a national cap to the amount of benefit that can be claimed for rent, and the other was a local cap where benefit can only be claimed for the value of the cheapest 30% of private housing. Claimants are entitled to whichever is the lower of these caps and it is only in Inner London that the national cap is lower than the cheapest 30% of properties. We can compare the impact of these policies by looking at how different boroughs are affected by these changes.
Figure 2 then shows the same data as figure 1 but broken down instead by where the national LHA cap applies. As the different caps are applied on the basis of Broad Rental Market Areas and not local authority areas, some will be affected by both
Figure 2: The percentage change in the number of private rented sector housing benefit claimants in London by where the national cap applies*
Claimants in areas affected only by the national cap throughout are hit the worst, with a 7.1% fall in claimants. Only one borough in this group, Hackney, has not seen a decrease in the number of claimants (the number is unchanged).
In boroughs that are mixed or just affected by the local cap, there has been an increase. This suggests that people may relocate within a borough if there are properties under the national cap in the cheapest 30%. It is likely, though, that people will still have to move, but within the same borough – from the more expensive to the cheaper parts. What this means is that as well as London becoming more equal between areas, it may become more unequal within areas too. Notably, the areas that are only partly affected by the national cap are those which are on the edge of Inner London, not fully in the suburbs; places like Haringey, Newham and Brent.
These trends are some confirmation of the worries expressed in the 2011 London's Poverty Profile, which showed that the shortfall in rent due to the changes to LHA were the largest for every property size in Inner West London. Monitoring Poverty and Social Exclusion 2012 also indicated that the growth in private rented claims in London between February 2011 and February 2012 was quite low in Inner West London. It can now be shown that they have fallen into reverse.
The is a clear indication from these trends that whilst people on low incomes are able to cope with having their housing benefit restricted to the cheapest 30% of properties, when the level is set even lower than this they cannot. It appears that the national cap is making parts of London a no-go zone for people on low incomes.
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* We have included “unknown tenure” claimants in our calculation of the change in private rented sector tenants in figures 1 and 2 as in Westminster the number is unusually high and has increased over the period of analysis – this means that our numbers on the fall in private sector claimants is a conservative estimate.