Rising housing costs are a major factor influencing poverty in the UK. Research has shown that high rents reduce the incentive for those in poverty to seek work. Social housing is highly targeted at low-income households and is the most effective aspect of the welfare state in reducing poverty, as it provides affordable housing. However, many low-income working households still struggle with housing costs, relying on in-work housing benefits to afford their rent.
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Rents, affordability and
poverty
Savills/JRF Seminar 14/9/17
Brian Robson, Acting Head of Policy & Research
2.
3. “The underlying level of rents emerged as
the principle housing factor influencing the
incentive to work.”
Ken Gibb et al; How does housing affect work incentives for people in poverty?, JRF 2016
6. “Social housing is highly targeted on people
with low incomes and has been shown to be
the most ‘pro-poor’ and redistributive major
aspect of the entire welfare state.”
Rebecca Tunstall et al, The Links Between Housing and Poverty, JRF 2013
7. “Social housing is highly targeted on people
with low incomes and has been shown to be
the most ‘pro-poor’ and redistributive major
aspect of the entire welfare state.”
Rebecca Tunstall et al, The Links Between Housing and Poverty, JRF 2013
14m people in the UK living in poverty. Would be 3.5m lower if we looked at it before housing costs taken into account. Poverty levels in London double once housing costs are taken into account. So housing costs have a big impact on poverty levels – and this impact has been growing.
More generally – things to note are:
8m working age adults in poverty; big change in nature of poverty – e.g. late 80s was a pensioner issue.
Note 65% of working age households in poverty have someone doing paid work.
Employment at record levels, yet people still living in poverty. Layer on to that the rising cost of living, freeze on working age benefits.
WORK INCENTIVES:
Many people in poverty live within someone who’s in work, but how does housing impact on your decision to work or not?
Ken Gibb, academic who’s going to lead the new housing evidence centre – work for JRF last year found:
Well entrenched work ethic, even amongst people who could command only modest wages
Multiple disincentives to work, or increased hours – housing, transport, childcare
Principle housing factor? Rents. High rents contribute to a perception that people will be worse off entering work, or increasing hours.
People deterred by the risks in the context of an insecure labour market.
So rents are an important factor influencing the incentive to work. Social rents are also – as I said earlier – very important for poverty rates, and our studies have shown poverty is very sensitive to the level at which they’re set.
You might remember this stat from 2014 – we modelled forward to 2040 to see what the impact of raising social rents to 65% of market rents would be by then. The modelling done for us at that time found that that measure alone would put an extra 1.3m people in poverty by 2040.
More time has since elapsed.
Important chart. What it’s showing is – for each housing tenure - the proportion of households – all households – spending more than 1/3 of their net income on housing, over time.
Orange line is the proportion of households spending more than one third in the PRS – about 45% of households do. That’s much higher when you look at households in poverty in the PRS – ¾ of them pay more than a third in income.
The blue line is the proportion of those with a social landlord spending more than one third of income on housing. Look what happens post 2011/12: CLICK. That’s the impact of affordable rents.
So there are two things going on:
More people on low incomes living in the PRS – and facing high rents.
Those who can get into affordable rented housing are paying more, facing those work disincentives Ken found.
Our conclusion:
We need more affordable rented housing – it has traditionally mitigated against poverty, but our analysis shows likely to decline from housing 1 in 7 to 1 in 10 by 2040.
We need to make it more affordable – linking to the market is increasing costs as a share of income. Likely to put 1.3m more people into poverty by 2040, probably more when we factor in the switch to LHA rates of housing benefit. Irony being that that is being done to try and keep some supply going.
Social housing is highly targeted on people with local incomes and has been shown to be the most PRO POOR and REDISTRIBUTIVE major aspect of the entire welfare state.
The most pro-poor and redistributive part of the entire welfare state.
That’s what we do in social housing, and we should be really proud of it.
So we’ve got this great measure to tackle poverty through housing policy. But there are two big problems:
Firstly, there’s not enough of it to go round. Fewer than one in 7 people living in social housing now, and by 2040, it’ll be just 1 in 10. That’s a big problem when we have 13million people living in poverty. Assessed need 80,000 units per year, building less than half that, forcing people in poverty into PRS.
Secondly, what rented stock we do have is becoming more expensive, with the move to market-linked affordable rents.
So we do need to talk about rents.
IN WORK HB: - 60% of those claiming in-work housing benefit, are still claiming 2 years later. 40% manage to escape – good news.
But look what’s happened in between:
About 40% of those still claiming have an unbroken claim in work
But the majority of those still claiming have either switched to an out-of-work claim; or have broken their claim at some point. There’s a lot of dynamism beneath the surface.
