The private rented sector is now the poverty front line
Today NPI’s 15th annual Monitoring Poverty and Social Exclusion report is published by the Joseph Rowntree Foundation. To coincide with the report, this week we will be writing a series of blogs that draw directly from the material in it.
We’re leading this series of blogs with housing because the connection between housing and poverty is now very important indeed – and this connection is different from what it has been for several decades. One of the most dramatic ways that poverty is changing is extent of low household income in the private rented sector. This is also the sector where housing costs are highest and the place where cuts in welfare spending are likely to be harshest.
Ten years ago more than half of people in low income households lived in the social rented sector. Since then, the number of social renters in this situation has fallen while the number in the private rented sector has doubled, to reach 4 million (see figure below, indicator 45B, p130).
Two things lie behind this shift in the tenure/poverty pattern. First, the proportion of all dwellings in the private rented sector has almost doubled since 2000/01, from 9% in 2001 to 17% in 2010 (Indicator 44A, p126).
Second, if we look at the proportion of people in low income, in 2000/01 this poverty rate for social renters (54%) was 17 percentage points higher than the rate for private renters. Over the last ten years the poverty rate for social renters has fallen substantially whilst the poverty rate for private renters has remained static so the two rates have converged. In 2010/11 the poverty rate for all renters is now more than three times the rate for owners (Indicator 45A, p130).
Alongside this, private renters have to spend the greatest proportion of their income on housing (Indicator 46B, p131) and the number of people having to claim housing benefit in order to meet their rent payments is increasing across the country (Indicator 47B, p132).
In the last year, financial support for private renters has been further constrained as the amount of Local Housing Allowance (LHA) a tenant can claim has been capped at the cost of the cheapest 30 per cent of properties in an area. In Central London, where a national cap translates into an even lower proportion of the local average, the constraint is even tighter.
As the cap has only recently been applied it is still difficult to see the impact in the official data. A possible response for households whose LHA is cut is to move to a cheaper area. One could infer from the lower than average rises in the number of LHA claims in Inner London and the higher than average rises in Outer London that people are moving from the former to the latter where housing costs are usually lower.
Another response could be to find work, or work more hours. In fact, the number of housing benefit claimants who are in work has increased substantially in recent years. A study by the Building and Social Housing Foundation showed that 93 per cent of the rise in housing benefit claimants in 2010 and 2011 was among working households.
The latest way the Prime Minster has suggested cutting spending on housing is to cut housing benefit to the under 25s (which may be confirmed in the autumn statement next week). Jules Birch from Inside Housing magazine points out that “the effects would be felt by people with no parents to go back to, by victims of abuse, by people who are working but can’t afford their rent and by people who have children themselves”. Surely a policy that removes their entitlement to secure housing will result in homelessness.
The changes we can see in poverty and housing are happening now. Tenure is becoming a strong determinant of poverty, without a deposit for ownership or access to affordable housing, more and more people are being forced into an insecure tenure with high housing costs and facing a high risk of poverty. In the last few years government policy has only served to accelerate the problem rather than alleviate it.