Rising private rents threaten Scotland's poverty record

Scotland’s poorest families are facing higher housing costs as more move into private rented homes - threatening the country’s lower poverty rate.

The findings are detailed in a report for the Joseph Rowntree Foundation (JRF) ahead of the Scottish independence vote, written by the New Policy Institute (NPI).

A separate report, published by the University of Glasgow and funded by JRF, has found poverty in Scotland is now lower than in the rest of the UK – an historic shift – and explains why.

Households in Scotland spend a smaller share of their income on housing costs than in England, which means the country has a lower poverty rate overall. Social housing rents are nearly 25 per cent lower in Scotland than in England while house prices are around 20 per cent lower.

But this trend is in danger of being reversed as more and more low-income families are living in the higher priced Private Rented Sector (PRS), putting more at risk of poverty as incomes are eaten up by higher rents.

With a lack of alternative accommodation for low income families, the housing benefit bill is picking up the tab to cover the costs.

The analysis found:

  • Scotland’s historically large share of social housing has fallen by 17 percentage points in the last 20 years – from 830,000 in 1991 to 575,000 in 2011 (24% of households).
  • Over the same period, the proportion of households in the PRS has almost doubled from 7 per cent (137,000) to 14 per cent (325,000) in 2011.
  • The number of households in poverty in the PRS has doubled in the last decade to 120,000, while the number in social housing almost halved to 190,000.
  • One quarter of poor households live in the PRS, up from one in 10 a decade earlier. Housing costs in the sector account for around 23% of household income - up by 5 percentage points in the same period.
  • In the last five years, the number of private rented households in Scotland needing housing benefit to help with their rent rose by 62 per cent, from 60,000 in 2008 to 97,000 in 2013.

Tom MacInnes, co-author of the report, said: “Affordable housing, often social housing, has been key to progress in tackling poverty in Scotland. As the stock declines, low income families increasingly find themselves in more expensive, private rented accommodation. This undermines the Scottish Government’s hopes of reducing poverty and tackling high living costs.”

Jim McCormick, Scotland adviser to JRF, said: “The focus of debate on housing during the referendum campaign has been dominated by the under-occupancy charge (the so-called ‘bedroom tax’). While there have been significant steps to mitigate its impact, both sides must not lose sight of another trend: more families facing higher housing costs and rising levels of poverty in private rented homes. Whatever the outcome, failing to act on these stark figures will see Scotland’s poverty rate rise.”

The second, separate report, by Nick Bailey at the University of Glasgow, details how poverty in Scotland has fallen compared with the rest of the UK and explores how this has been achieved.

  • It found poverty in Scotland is now lower than in the rest of the UK– an historic shift. If Scotland had continued to have a higher poverty rate than the rest of the UK, around 200,000 more people would have been living below the poverty line in Scotland in 2011/12 than was the case.
  • The change occurred from around 2003/4 because the poverty rate for people of working age improved in Scotland, whereas it hasn’t changed in the rest of the UK. Within the working age group, people without children and those in work have seen the most improvement.
  • The report suggests the most likely factors explaining the change are relatively better labour market performance in Scotland and lower housing costs. In England, the Government has encouraged social landlords to charge rents closer to market levels. The Scottish Government has not pursued this policy so rents have remained more affordable, and this has had real benefits for lower-income households.

Nick Bailey, Senior Lecturer in Urban Studies, at the University of Glasgow said: “The reduction in Scotland’s poverty rate is modest and comes at a time of great hardship for many families. Even so, it represents a real improvement and an historic break. One factor is housing costs – an area where the Scottish Government can have great influence. It needs to ensure that it makes affordability of rents and mortgages a central aim of anti-poverty policy in future.”