Nearly 5m households in England now face ‘grave’ affordability problems

Problems most pronounced in PRS where four out of ten of those on low income households pay over 40% of that income in rent.

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Nearly 5m households in England now face ‘grave’ affordability problems – that’s over one in five (21%) of all households and almost 40% of those in the lower half of income distribution.

The extent of the growing affordability crisis is exposed in a report released by the Affordable Housing Commission.

This shows the greatest problems are in the private rented sector (PRS) with two million households facing affordability problems – equal to 43% of all households renting privately and rising to 51% for those households of working age in the bottom half of incomes.

In the PRS, four out of ten of those in the bottom half of incomes are paying over 40% of their household income in rent, the report says.

“The term “affordable” has become a much-abused word in housing circles, successive governments have taken it to mean rents or purchase costs which are lower than in the open market.

“But paying rents of, say, 80% of the market level is still far beyond the means of many who need a home,” said Commission chair Lord Best.

Local Government Association housing spokesman Cllr Martin Tett said that “at the most acute end”  councils are currently housing over 200,000 homeless people in temporary accommodation – including over 120,000 homeless children.

Citing the loss of an assured shorthold tenancy as the greatest reason for people becoming homeless, he urged government to “empower councils” through the forthcoming Spending Review.

That, he said, meant adapting welfare reforms, sustainably funding councils and reforming Right to Buy so that councils can resume their “historic housebuilding role”.

Established by independent think tank the Smith Institute, with the support of the Nationwide Foundation, the Commission examines the causes and effects of the current housing affordability crisis and propose workable solutions.

Released today (June 6) the Commission’s new report, ‘Defining and measuring housing affordability – an alternative approach’, launches a new measure of ‘affordability’ looking at it in the context of household incomes and what people can afford, be it to rent or to buy, rather than the market place which focuses on market rents and house prices.

This approach is offered as an alternative to the current ‘Affordable Rent’ model, which the report claims fails to support the provision of new affordable homes.

The Commission has looked at what level of income spent on housing is likely to cause hardship and stress with the new research shows that when rents or purchase costs exceed a third (33%) of household income for those in work, it can lead to financial difficulties, arrears, debts and consequent personal problems.

And these problems become critical where housing costs are 40% or more of household income.

Where affordability issues are acknowledged as  curtailing the ability of people to buy a home, the report reveals 1.6 million renters (mostly in the PRS) could afford to buy but can’t, mainly because of the need for large deposits.

This is an increase of 0.6 million since 2010.

At present, three quarters of renters have little hope of buying a home.

Using its new measurement of housing unaffordability in England, the Commission has identified four different types of households which are affected most:

  • Struggling renters of working age

Currently, rent levels for over a quarter (29%) of all tenants in the PRS create an affordability problem.

For social housing tenants, the figure is more than one in ten (13%): although rents are lower than in the PRS, so are incomes.

For those in the bottom half of all incomes, affordability problems rise to 16% for all tenants in social housing and 51% in the PRS

  • Low income older households

One million people over the retirement age have housing affordability problems. Most of this group are living in owner-occupied accommodation and are without the resources needed to move or improve their current situation.

The Commission has expressed special concerns that numbers of older people in the PRS will be much higher in the years to come, creating severe affordability issues when people switch from earnings to pensions  

  • Struggling homeowners

Currently, 0.9 million home owners are paying more than 33% of their earnings on monthly housing payments (excluding the part of the mortgage repayments that is paying off the debt and accumulating an asset).

This group, however, are at risk of  increases in interest payments and a change in personal or employment circumstances that would create severe affordability problems

  • Frustrated first time buyers

5.5m renters are currently unable to buy a home of their own.

However, 1.6 million renters can afford to buy, and of them, 1.3 million are in the PRS and 0.3 million are in the social housing sector

The Commission will now examine how the definition and measures can be effectively applied to housing policy, funding and planning to help deliver increased levels of affordable housing in different areas, for different people.

Two different official datasets were drawn into the research: the English Housing Survey and the Family Resources Survey.

The English Housing Survey has a sample size of over 10,000 households and the Family Resources Survey over 20,000.

Regression analysis showing the link between paying over a third of incomes on rent and facing housing stress (such as being behind on rent or finding it very hard to meet rent payments).

The methodology also factored in the ability of people to live in homes that meet the government’s minimum standards for housing quality (decent homes standard) and size (bedroom standard), as well as shortfalls in housing support for those households in poverty.


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