Families with children renting in the private rented sector, particularly if they are on a lower income, are finding it hard to make ends meet, new research shows.
Tenants are paying more yet the quality of homes for rent has not increased dramatically and changes to housing benefit are making it even harder with more young people unable to afford to buy or to rent, according to the analysis from the Institute of Fiscal Studies.
The overall proportion of the population in Britain who live in rented accommodation has risen to 35%, up from 29% in the mid 1990s, but this growth has been entirely in the private rather than social sector and heavily concentrated among the young, the report shows.
It also reveals that just 12% of 25 to 34 year olds rented privately in the mid 1990s but this has since trebled to 37% and the shift towards private renting largely reflects falls in home owner occupation towards the top and especially the middle of the income distribution and falls in social renting towards the bottom of the distribution.
Relative to the general price level, the average private rent paid in the mid 2010s was 53% higher than that in the mid 1990s in London and 29% higher in the rest of Britain. Those rises mainly occurred in the late 1990s and early 2000s in London or in the early and mid 2000s in the rest of the country.
It also explains that detailed data on housing characteristics available within England show that, for the most part, increases in private rents paid since the turn of the century are not explained by improvements in the quality of property in the private rented sector. Rather, people generally seem to be paying more for similar properties.
Londoners spend more of their income on rent than renters elsewhere and the differential between London and the rest of the country has increased recently. In 2013 to 2015, the average rent to income ratio among private renters was 40% in London and 28% in the rest of Britain.
This ratio increased by 5% in London between 2006 and 2008 and 2013 to 2015, while not changing in the rest of Britain and the report says that this is because the incomes of private renters have fallen in London whereas they have flat lined in other parts of the country.
Looking just at low income renters in the private sector, those in the bottom 40% of the income distribution in each region, the fraction whose housing benefit does not cover all of their rent has increased quite steadily, from 74% in the mid 1990s to 90% in the mid 2010s.
The biggest change occurred among low income working age households with children, where it rose from 63% to 90% over the same period. In the social housing sector, the increase has been concentrated in recent years, jumping from 56% in 2010 to 2012 to 68% in 2013 to 2015.
The report also points out that many tenants on low incomes who find that their benefits do not pay market rents are unable to afford alternative homes in the private rented sector, or access social housing.
Responding to the findings, Brian Robson, acting head of policy and research at the independent Joseph Rowntree Foundation, called on the Government to uprate Housing Benefit in line with local rents in next month’s Budget.
‘These worrying figures show how families with children are being hit hard by the crippling cost of housing and cuts to Housing Benefit, leaving them struggling to make ends meet. Even with Housing Benefit, people on the lowest incomes are still seeing more than a third of their remaining income eaten up by their housing costs. It shows why the Government needs to lift the freeze on working age benefits and tax credits so incomes keep up with the rising cost of essentials,’ said Robson.
‘Building more affordable homes will help fix the root cause of our broken housing market, but it’s clear families who are just about managing need help now,’ he added.
