3 in 10 renters can't afford to pay their rent. Few will get on the housing ladder. London's Mayor is getting serious about changing this.
The latest annual English Housing Survey came out on Wednesday, revealing that three in ten renters find it difficult to pay their rent. This means families are making choices between paying bills and mounting up debt – an unforgiveable situation in the 21st century.
Most of these renters are entitled to housing benefit, but, as the survey finds, of the 889,000 private renter households who receive it, the payment covers the full rent for only 110,000 of them. Many will be working but 473,000 are not in paid work so have to top up their rent with other benefits – and go hungry.
A generation ago, the Conservative government began selling off council housing and encouraging buy-to-let in its stead. Worries about market-driven rents were dismissed as housing benefit would “take the strain”. But as demand outstripped supply and housing benefit rose in line with rents, the Cameron government targeted it for cuts, and the link between rents and local housing allowance was broken. This week’s figures show how this growing shortfall is hurting millions of us.
Even for private renters who can cover their rent every month, the survey is clear how difficult it still is to put money aside for the future – 2.8m households – well over half of 4.5m in private rented homes – have no savings. Of those, half expect to buy a home, but if they’re to have any chance of this, rents have to come down dramatically before they can raise the deposit needed.
There are still about 1m private renters who expect to buy and have some savings – including 299,000 who have more than £16,000. But it’s clear that many private renters could only access home ownership if the Bank of Mum and Dad can help them out.
Those who don’t have well-off parents or a lucrative job face growing older in private rented homes. As well as the cost involved in that – to individuals and the state – there’s the insecurity associated with private rented homes. The EHS tells us that 12% of tenancies are ended by the landlord, 25% private rented homes are non-decent and 14% are simply unsafe.
We’re expecting the government to launch a consultation shortly on ending unfair evictions. As well as giving tenants stability, this has the potential to transform the quality of rented homes too. By removing the threat of retaliatory eviction, tenants would have more power to compel their landlord to fix disrepair. But we’d still be left with high rents.
Sadiq Khan has just published his ‘model tenancy‘ and, alongside it, the most ambitious proposals to intervene on rents we’ve had from an elected politician in a generation. London is being stifled by expensive rents – people are being priced out of the areas they grew up in, and PricewaterhouseCoopers this week highlighted the difficulties faced by public sector workers in the capital.
While we need to build to meet the demand for homes, it will take years for this to make a serious dent in market rents and for renters’ household finances to recover. Renters need relief now so politicians must consider short term solutions that can complement long term investment. Sadiq Khan recognises the urgency and ambition needed – we now need this across the political spectrum.
Dan Wilson Craw is the Director of Generation Rent.
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7 Responses to “Amid government inaction, Sadiq Khan is doing something about Britain’s private rental crisis”
Martin Grubb
The GLA Housing Committee commissioned expert advice from the Cambridge Centre for Housing Policy Research some years ago and learnt that rent controls have entirely predictable but unintended consequences. It is a pity that advice has been discarded. Currently the allocation of demand for rented accommodation is determined by the brutal transparency of the market in setting the highest rents that millions have to be prepared to find to compete for that accommodation. Rent controls do not change that market rent but they transfer the ability to profit from it from the landlord to the tenant. A tenant with a controlled rent lease has an asset that he can sublet at a profit or obtain ‘key money’. This will be against the lease terms but what is the point of the landlord incurring court costs to regularise a situation which leaves him no better off. Once controls are introduced political pressure will mitigate against relaxation and the gap to real market levels will grow as will associated corruption and criminality. Decent landlords will exit the market not wishing to be involved in exactly the same rackets that confront Local Authority housing departments, who seem unable to do anything about it.
The CCHPR advised that rent control was the single biggest policy that would encourage landlords to exit the private rented sector. Rent control in Europe is accepted by landlords as part of a social contract because they receive tax benefits for providing housing plus the fact that no other European city has the extraordinary magnetic population dynamics of London. Yet here we operate the perverse policy of imposing greater taxes on landlords than on other economic activities, and, even more perversely, encourage popular support for such policies from those most disadvantaged by their consequences, which is the entirely predictable diminishing rental stock.
The key to any resolution to the totally inequitable level of rents and the continued transfer of property wealth away from the young is the economic understanding of demand rather than supply. If the LB of Islington borrows to build property to take families off its waiting list we have to decide what happens to the accommodation released, by definition unsuitable for a family but appropriate for a single person or sharers. Because of the extraordinary pull of London it is more likely that the released property will be occupied by young achievers from Swansea, or Glasgow or Warsaw or Madrid and that means that the additional housing in Islington turns up as the additional property in the cities that our young achievers WOULD HAVE OCCUPIED had they not come to Islington BUT THE DEBT STAYS IN ISLINGTON.
This is the risk from what economists call ‘fiscal transfer’ and every Borough Treasurer knows that it is a challenge to their fiduciary obligations. How do you justify to your ratepayers their funding of housing policies of other cities? Have we reached a stage when Londoners deserve a degree of housing priority? No expert opinion believes that London can build its way out of this problem. It is a tribute to a great city that millions more would come to London if they could but building is pointless and expensive against an infinite external demand. Why is it that politicians and the commentariat are unable to grasp these basic fundamentals whilst the pressures on citizens continue to mount?
Rafael López Isturiz
good post