Rising housing costs have wiped out 90% of living standards gains for low-income families since early 2000s, a new report reveals.
The Resolution Foundation wants all party manifesto commitments to tying housing benefit to actual rents, recognizing the need for more social housing and recognising that social rents are on track to rise faster than private rents in the years to come – which may well push up further housing cost inequalities.
Research released by the Foundation shows the housing crisis is really three crises: low home ownership, high housing costs and a particularly acute disaster for low-income families.
The report – Inequality Street – says where higher housing costs have cut incomes and increased inequality, the poorest families have borne the brunt.
But Inequality Street does note that public concern about housing has grown in recent years, with approaching one-in-five adults now believing it’s one of the most important issues facing Britain – up from one-in-twenty in 2001.
“Over the next few weeks, we not only need to see election manifestos promising to address falling home ownership; we also need political parties that are serious about lowering the cost of a roof over your head for lower-income Britain,” said Daniel Tomlinson, Research and Policy Analyst at the Resolution Foundation.
“Political parties also need to address the legacy left from forty years of higher housing costs.
“As incomes have not risen at anywhere near the same pace as housing costs, families have dedicated a greater share of their income to housing.
“This burden has landed most heavily on low-income families, particularly in recent years when housing costs have actually fallen for higher income families,” he said.
Inequality Street finds that home ownership among young (25-34 year old) families has, despite a recent rise, almost halved since its 1989 peak – from 50% to just 28%.
High house prices relative to family incomes mean it will remain harder for young families to save a deposit large enough to get on the housing ladder, the report says.
The report notes however that high day-to-day housing costs also matter hugely when it comes to family living standards in the here and now. Back in 1980, the average family spent just 10p of every £1 of income on housing. Today, this has doubled to 20p.
This burden of rising housing costs has fallen more heavily on those families with lower incomes.
In 1980, the poorest families spent 15p of every £1 of income on housing – now that’s more than doubled to 40p.
The Foundation notes that higher social rents, more private renting and declining support from housing benefit have been a major living standards headwind for Britain’s poorest families over the past 15 years, wiping out 90 per cent of all income gains since the early 2000s.
Low-income families have suffered a £1,200 living standards hit from fast-rising housing costs since 2002.
At the same time, due to falling interest rates, high-income families are £400 better off as their housing costs have fallen in real terms since 2002.
To Inequality Street, this means that recent trends in housing costs have acted to push up inequality in the UK.