|Date:||13 October 2017|
|Authors:||Robert Joyce , Matthew Mitchell and Agnes Norris Keiller|
The rented sector is growing. The proportion of people in Great Britain living in private rented accommodation has more than doubled, from 8% in the mid 1990s to 19% in the mid 2010s, while among 25- to 34-year-olds this proportion has trebled from 12% to 37%. Over the same period, average private rents have risen by 33% in real terms.
In recent years, low-income tenants have also been affected by substantial cuts to housing benefit (HB), which are currently saving the exchequer around £3 billion per year. The net result is that paying rent now uses up an average of 28% of the (non-HB) income of low-income private renters (defined as those in the bottom 40% of the income distribution in their region). This is up from 21% in the mid 1990s. Reforms in the pipeline mean that, if rents continue to rise, support for housing costs will fall further and further behind the cost of housing.
These are among the conclusions from new analysis published today by IFS and funded by the Joseph Rowntree Foundation. Other key findings on the cost of renting include:
Around 1.9 million privately renting households (containing 4.8 million people) are entitled to less HB than they would have been without reforms introduced since 2011, by an average of £24 per household per week. Reforms have also cut the entitlements of 600,000 social-renting households (containing 1.3 million people) by an average of £19 per household per week.
The reforms have so far:
HB entitlements are forecast to fall further behind rents in the coming years. For private tenants, this is because the locally varying caps on HB awards are no longer updated according to changes in local rent levels. These caps are to be frozen until April 2020 and then increased each year in line with national household inflation as measured by the CPI. For social tenants, it is due to the gradual roll-out of those caps, which currently only apply to private tenants, to those in social housing from 2019. Looking at these upcoming changes:
Taking together the past and likely future effects of changes to HB policy:
Agnes Norris Keiller, a Research Economist at IFS and an author of the report, said:
“Wider problems in the housing market are pushing up housing costs and increasing the size of the rented sector. While these remain unaddressed there is likely to be an ever tougher choice: continue decoupling support for housing costs for those on low incomes from the rising cost of housing or change policy and accept further rises in the housing benefit bill. The current approach effectively places most of the risk of further rises in costs onto low-income tenants, and little on the housing benefit bill. While containing the cost to taxpayers, it leaves housing benefit vulnerable to becoming increasingly irrelevant with respect to its purpose – maintaining the affordability of adequate housing for those on low incomes.”
1. This press release refers to IFS report R132 'The cost of housing for low-income renters', published on 13 October 2017.
2. This work has been produced with funding from the Joseph Rowntree Foundation (JRF). The Joseph Rowntree Foundation is an independent organisation working to inspire social change through research, policy and practice. For more information visit www.jrf.org.uk JRF is on Twitter. Keep up to date with news and comments @jrf_uk. For press releases, blogs and responses follow @jrfmedia.