Written evidence submitted by Resolution
Foundation
SUMMARY
- — Too
rich to access social housing and too poor to access home ownership,
740,000 low earning households live in the private rented sector
(PRS). This tenure provides a temporary, preferable, bolthole
for some people. For others it can provide a long-term home, often
not out of choice.
- — Affordability
is an issue for this group, in part because of low take-up of
Housing Benefit (HB): The Department for Work and Pensions (DWP)
estimate that half of those in work who are eligible do not receive
it.[97]
Just 7% of low earners currently receive HB which, administrative
issues aside, provides a welcome source of support.
- — We
recently conducted qualitative research into low earners experiences
of the PRS. Our findings highlights a number of potential implications
of the Government's announcements:
- — Supply
of PRS accommodation and choice: many
low earners are already experiencing difficulties accessing the
PRS due to poor local supply, lack of decent accommodation and
few landlords willing to let to this market. The Governments proposed
changes to Local Housing Allowance will further reduce choice
for low earners and may encourage landlords to stop letting to
this group entirely.
- — Affordability:
decisions about where to live were not based on economic criteria
alone. In fact, location was the most important consideration
for respondents when choosing where to live, to be near the local
school, work, friends and family. People talked about the physical
and mental upheaval of moving and were not prepared to move to
areas of cheaper rents. At the same time, the lack of affordable
local supply meant that many were over-stretching themselves financially
and they were susceptible to arrears. The Government's proposals
assumes that people will move to areas or accommodation with cheaper
rents, but our research suggests people will stay put and struggle
to make up the difference themselves, in order to provide stability
for themselves and their children.
- — Demand
for social housing: making changes in
one aspect of the housing market has implications for other parts
of it. By further marginalising the private rented sector through
cuts to Housing Benefit, demand for social housing is likely to
increase among a group who currently receive little of the overall
housing subsidy. At a time when reliance on the PRS is likely
to increase subsidies to support rents will be as important as
subsidies to assist people into home ownership.
INTRODUCTION
1. "Low earners" is
the term the Foundation uses for the group of people who are "too
rich" to qualify for state support yet often "too poor"
to access the benefits of private markets. At its simplest, we
consider the group to be made up of households in income deciles
three, four and five: that is, with gross annual income between
£11,650 and £27,150.[98]
Around 3.8 million households fall into this category in the UK,
equivalent to around 7.4 million adults.
2. The Foundation has found that
low earners face distinct challenges across a range of areas because
they are:
- squeezed by the
mixed economy;
- particularly exposed
in the current economic context; and
- at risk of being
overlooked by policy makers.
3. In housing, squeezed between
home ownership and social housing roughly, 740,000 low earning
households live in the private rented sector. While only 7% of
low earners in the PRS currently receive Housing Benefit, many
more are entitled to it: DWP estimate that half of those in work
who are eligible do not receive it.[99]
These low earners often receive partial Housing Benefit. However,
the temporary and insecure nature of their work can mean periods
of full and partial Housing Benefit as they cycle in between low
pay and no pay.
4. We have recently undertaken
qualitative research, based on 40 interviews with low earning
tenants, to consider their experiences in the private rented sector.
Our findings provide some insight into the implications of the
Government's recent announcements.
5. Our submission focuses on
the effect of the proposals on:
- (a) Supply of PRS accommodation and choice
within the market.
- (b) Affordability.
- (c) Demand for social housing.
SUPPLY OF
PRS ACCOMMODATION AND
CHOICE WITHIN
THE MARKET
6. Many of the low earners we
spoke to were experiencing problems finding suitable PRS accommodation
in their areas. Poor local supply and a lack of decent properties
were frequently cited by respondents in the research. Families
were experiencing particular problems:
"There's not a lot of private renting and even
less in the ranges that we are looking for. Either it's totally
unacceptable or it's acceptable and out of our price range."
(Chris, 21)
"The places I was looking at were not nice at
all, and the ones that were decent were just too expensive."
(Charlotte, 28)
"There's not much family sized rented accommodation
in the area, unless you are in a really good job, which I'm not."
(Clare, 43)
7. These problems were further
compounded for recipients of HB who, as well as trying to find
decent accommodation, were also having to find a landlord willing
to let to them.
"I did look at some places but they didn't want
to take Housing Benefit, the sheer mention of it and you are penalised.
I think people look upon people who claim housing benefit as people
who are not contributing in a way, but I am massively contributing
— my wages essentially pay my half the rent." (Clare,
43)
8. There were several implications
of this constrained access. In a few cases people were lying about
receiving HB, or managing to conceal it through the direct payment
of HB to themselves:
"I do prefer it coming to me, because then in
some cases the landlord doesn't have to know, but you don't want
people knowing how much help you are getting and things like that."
(Sarah, 25)
9. Others reported feeling insecure
and in a weak bargaining position because they had such limited
options. Razia said of her previous landlord:
"Yeah, he was probably the only one that accepted
it at the time, he knows that anyone who is on housing benefit,
he can put pressure on. Many landlords don't accept housing benefit,
and when you've got 4 kids, nobody wants to know." (Razia,
28)
10. The problems experienced
by recipients of Housing Benefit in accessing private rented accommodation
are well documented. Research by Shelter[100]
found from a survey of 110 landlords that 60% would not accept
Local Housing Allowance claimants. Evaluation of the LHA also
found that 7% of landlords and agents contacted via newspapers
directories preferred non-housing benefit claimants, but even
among landlords who were contacted via their benefit-recipient
tenants, 52% preferred not to let to this group. [101]
11. The Government's proposals
to introduce an upper Housing Benefit rate, and the calculation
of Housing Benefit at the 30th percentile is likely
to further constrain choice for Housing Benefit recipients by
restricting them to the lowest 30% of the market and making some
areas, particularly London, inaccessible. It could also hamper
supply of PRS accommodation as landlords will either have to reduce
rents or stop letting to the Housing Benefit market completely.
AFFORDABILITY
12. The low earners we spoke
to who were receiving Housing Benefit felt it was a welcome source
of support, often helping to keep them afloat:
"My rents affordable, but only because of the
benefits I get." (Sarah, 25)
"Yes, housing benefit has helped; it takes the
pressure off because you know there is some money coming in. But
it's a nightmare really because I'm on my own; I haven't got any
rich relatives that are going to give me say £100, I'm literally
on my own." (Clare, 43)
13. When we asked people what
criteria they had when looking for accommodation, it was very
apparent that decisions were not based on economic criteria alone.
In fact, location was the most important factor, to be near a
local school, friends, work and family.
"It was mainly location to be honest, when we
were living in Coventry before, we were quite a way outside the
city centre, so it used to take a while to get into town for a
drink and taxis were expensive. Where we are now is very close
to the city centre and I've grown up around this area when I was
younger, so I really wanted to try and get back to it." (Sean,
32)
14. The result of this was that,
in areas of higher rents, people sometimes over- stretching themselves
to live in a chosen locality and were not prepared to move to
an area of cheaper rents because of the upheaval this would create.
The thought of having to move was anxiety provoking, particularly
where there were so few other options in the area. This was especially
true when they had lived in the property for a long time or had
already moved into the PRS following a crisis and wanted to maintain
some continuity for the sake of the children.
"The renting here is a bit more expensive than
where I was, but I'd rather pay that little bit extra for the
kids to be safer and there's a nice park around the corner. It
does mean I drive 12 miles a day for school, but it's worth it.
A lot of people say I'm mad, but I didn't want to move their school
and for them to have that upheaval. The last thing I would want
is not having a house for the two kids. If you're on your own
you can sort something out for just yourself." (Katie, 32)
"I've been here 19 years... we didn't intend
on staying this long but I've moved all my life, I just dont want
to move." (Liz, 48)
"If I had to move I would probably have
to move to a place in a much worse state of repair and pay less,
but you get what you pay for. We would have to move the kids from
school; I dread to think about it. I don't think we would be able
to find somewhere. I mean we have got a dog and the kids love
the dog. I don't think we could find somewhere that would accept
pets, we'd be buggered." (David, 40).
15. A lack of affordable local
supply, coupled with a low-income and limited buffer of savings
meant that some respondents were susceptible to arrears, particularly
following a change in circumstances. The result of this was that
tenants felt trapped in debt and unable to move.
Clare, 43, works as a part-time carer. She moved
into PRS accommodation with her three sons when she left an abusive
marriage. She lives in an affluent area and so her rent was high,
but she did not think that moving from the area was an option
for her with three children in school, and one of the reasons
she wouldn't consider social housing:
"I think if I had just declared myself homeless
I would've been housed, but maybe not in my area and I don't drive
and I've got two younger children who are still in education.
There are not that many council houses here to be fair and there
is a 10 year waiting list."
She receives £400 per month in Housing Benefit
but this leaves £750 per month to cover herself, taking up
all of her earnings. She has converted her lounge into a bedroom
for a lodger and was using the £200 rent he gives her each
month, plus her benefits, to pay the bills and other expenses.
"I'm living off my benefits and the lodger's
money, whatever I can really. I just live a basic life, I don't
have my hair done, I just have to make sure that my kids are ok,
that they have clean clothes, that kind of thing. My mum struggled
as well, so I'm quite used to that."
Clare got into arrears when she broke her arm and
was out of employment for six weeks. The outcome of this is that
she feels trapped and unable to move: if she leaves she will not
be able to get help from the council because she would be deemed
'intentionally homeless', and she wouldn't be able to move to
another PRS accommodation because she wouldn't be able to get
a reference from her current landlord:
"You get into a situation where you kind of
get trapped because if you become in debt with your landlord,
which I am a little bit, then they won't give you a council house,
but I also cannot get a reference from my landlady to move into
a smaller property because I'm in debt here."
16. Kathleen was in a similar
situation.
Hayley moved out of her council house because her
children were getting to an age which they could crawl, and she
was worried that her flat wasn't child friendly. She heard about
a scheme that would help people move into private rented accommodation
by assisting with the deposit. She called the Local Authority
and they put her in touch with an agent who identified a place
for her. At the time she was on Income Support and was told she
would receive Housing Benefit to cover the rent and would only
need to cover £40 herself. It turned out that this actually
£140. She is now in £2,000 worth of arrears and feels
there is no way out of it.
"If I had a deposit I would go, but I don't.
Plus I would have CCJ's against me because I haven't paid the
rent, which will affect the next property I go to. And II won't
get help from the Council because I would've made myself homeless."
(Kathleen, 25)
17. While some people spoke about
the disincentives to increase their hours at work, because of
the HB taper, others were happy to work longer hours because they
were proud to be working and enjoyed their jobs. However, many
people had had their hours reduced at work following the recession,
making it all the more difficult to get out of debt.
"I was full time, but now I'm 16 hours a week,
they said we're not earning enough money at the moment."
(Kathleen, 25)
18. The Government's proposals
regarding the calculation of Housing Benefit will mean that low
earners living in accommodation with rents above the 30th
percentile will have to make a choice to move from their existing
accommodation, potentially to another area, or make up the difference
in rent themselves. The former would cause significant distress
for some families, and the social and economic costs would be
considerable. The latter seems more likely and would mean that,
unless people can find more hours at work, they will stay put
and struggle. This could potentially creating bigger costs in
other parts of the budget if arrears and homelessness follow.
DEMAND FOR
SOCIAL HOUSING
19. Many of the low earners we
spoke to were not living in the private rented sector out of choice.
Their preference was to move into home ownership, with its greater
security and investment potential, or social housing because of
cheaper rents and greater security of tenure. However, the opportunities
for this were limited:
"I would rather get in a council place. They're
a lot cheaper. After fives years you get a chance to buy them."
(Sarah, 25)
"Having your own home is about the security
it gives you. Having a little place which you know is yours, nobody
can take it from you, and you haven't got anybody to answer to.
Kind of a king of his castle." (David, 40)
20. This is reflected in the
statistics: among the 40% of private renters who do not expect
to buy their own home, just 4% said this was because they preferred
the flexibility of renting.[102]
21. At the same time, the actual
subsidy that people in this income bracket receive for their housing
is far lower than for higher income groups. And reliance on the
PRS is likely to increase: the Building and Social Housing Foundation
have forecast that, if existing drivers of PRS growth continue,
20% of households will be private rented by 2020, with the private
rental sector outgrowing the social housing sector by 2013.[103]
22. Making changes in one aspect
of the housing market has implications on other parts of it. By
further marginalising the private rented sector through changes
to Housing Benefit it could increase demand for social housing,
particularly among a group who are already struggling within the
PRS and receiving very little of the overall housing subsidy.
6 September 2010
97 DWP, "Supporting people into work: the next
stage of Housing Benefit reform", December 2009:
http://www.dwp.gov.uk/consultations/2009/supportingpeopleintowork.shtml
Back
99 98 DWP, "Supporting people into work: the next
stage of Housing Benefit reform", December 2009:
http://www.dwp.gov.uk/consultations/2009/supportingpeopleintowork.shtml
Back
Back
100
Shelter (2009) "For whose benefit? A study monitoring the
implementation of Local Housing Allowance", London: Shelter. Back
101
Rhodes, D and Rugg, J (2005) "Working with the LHA: Landlord
and Agents" Early Experiences of the LHA in the Nine Pathfinders
Areas, London: Department of Work and Pensions. Back
102
CLG, Survey of English Housing Preliminary Report: 2007-08,
Tables 16 & 17. Back
103
Pattison, B; Diacon, D and Vine, J (2010) "Tenure trends
in the UK housing system: will the private rented sector continue
to grow?", Building and Social Housing Foundation. Back
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