- Rented housing swallows up almost three times as much of
renters’ incomes today as it did in 1979 due to the falling
generosity of policies that used to make housing more affordable.
- The value of housing subsidies for renters in 1979 would have
been worth around £45bn in 2020, but the removal of rent
controls, shrinking social housing stock and recent cuts to
housing benefit mean the actual subsidy shrunk by a third to
£31bn in 2020.
- Had subsidies not been reduced, housing affordability for
renters would have been largely unchanged relative to 1979.
- The housing affordability crisis for renters can only be
solved by rebuilding support mechanisms including more social
housing and re-linking housing benefit to market rents.
- This is significant as figures released this morning
by the ONS have shown the largest year-on-year increase in
rents to December 2022 in England since the data series began
in 2006, demonstrating the mounting pressures on renters as the
cost of living crisis continues to bite.
The affordability of rental properties would not have fallen had
successive governments not eroded housing subsidies over four
decades, according to a new report from the Joseph
Rowntree Foundation (JRF).
Rents in both the private and social rented sectors are close to
their highest for decades as a share of tenants’ incomes.
In ‘Housing affordability since 1979: Determinants and
Solutions’ authors Ian Mulheirn, James Browne and
Christos Tsoukalis, from the Institute, quantify the impact
of housing policy changes since 1979. They find that without
these changes, rented housing would be as affordable today as it
was 45 years ago.
Reductions in three forms of housing subsidy – sub-market rents
for social housing, private sector rent controls and cash housing
benefits – all contributed to declining affordability of rented
housing:
· The social
rented sector shrank from 31% to 17% of the English
housing stock and social rents moved from around half to
two-thirds of market levels. These changes reduced the effective
subsidy to renters from social housing as a share of total
day-to-day housing costs in the national accounts by five
percentage points – or around £14 bn per year by 2020.
· The abolition
of private sector rent controls in the 1980s cut
the subsidy to renters by a further five percentage points of
total housing costs, equivalent to £14bn higher costs for private
renters annually.
· While cash benefits
initially increased, recent reductions in the
generosity of housing benefits have reduced
subsidies for renters over the past 13 years.
If housing subsidies had remained at their 1979 levels as a share
of total housing costs, they would have been worth £45 billion in
2020 rather than their actual level of £31 billion.
Lead author Ian Mulheirn said:
“While the debate around housing affordability has focused on
supply, our analysis shows that the erosion of housing subsidies
has been the main factor driving the housing crisis we see
today.
“Had subsidies not been reduced, housing affordability for
renters would have been largely unchanged relative to 1979.
Policy debate about how to tackle the housing crisis should
therefore focus much more on the central role of housing
subsidies.
“This does not imply that we should seek to recreate the housing
policies of the 1970s. However there is a strong social and
economic case for social housing to play a bigger role for many
of the 1.9 million low-income families with children, pensioners
and people with disabilities renting privately who would
particularly benefit from greater stability of tenure.
“We also need to make a positive case for the central role of
Housing Benefit, rather than see it just as a cost to be
minimized. To improve the experience of living in the private
rented sector, policy-makers should end the Local Housing
Allowance freeze and re-link rates to the 30th percentile of
local rents, and introduce the reforms to the private rented
sector outlined in the recent ‘fairer private rented sector’
White Paper.”
Darren Baxter, Senior Policy Advisor, Joseph Rowntree Foundation
said:
“Being able to rent a suitable home is a crucial foundation for
life, and figures out today show just how hard that has become.
With the cost of renting a home privately continuing to rise and
more and more people reliant on this part of the housing market,
it is becoming harder to have that stable and secure platform on
which to build the rest of your life.
“Today’s figures confirm what many renters know too well – large
rent increases are going hand in hand with other cost of living
rises, to the point where 85% of low-income private renters are
going without essentials such as meals, heating or keeping clean.
Subsidies and an increase in the supply both have a crucial role
to play in ensuring everyone has a safe and secure place to call
home during good times and bad.
“This report shows us that there is a positive case to be made
for using housing benefit as a way of supporting families to lead
more secure lives, rather than it being seen simply as a cost to
the exchequer. By recognising, acknowledging and tackling the
housing crisis, governments can play a significant and positive
role in making life better for families around the UK.”
