The housing crisis is pricing workers out of ever more of Britain

Renting is now more expensive than owning with a mortgage in 44 per cent of all local authorities, but for many families it is the only option.

The fact that many ordinary working families are priced out of central London boroughs such as Westminster, Kensington and Chelsea and Islington will surprise no one. But a new report by the Resolution Foundation shows that there are now affordability black spots across all parts of the country where low and middle income families would have to spend more than a third of their income on housing to find a decent place to rent or buy. Working families are being priced out.

A couple with one child on £22,000, for example, has to spend more than 35 per cent of its net income – a commonly accepted ceiling for affordability - to meet the ongoing costs of a mortgage in nearly two fifths of all local authorities. If the same family wanted to rent privately, they would find that renting was unaffordable in a third of all local authorities. Housing costs are becoming a struggle even for median income families on £28,000.  In one in 16 local authorities, rent would eat up more than 35 per cent of their income. And in London, there is no local authority where a family on £22,000 can rent even a modest a two-bedroom property and pay less than 35 per cent of their income in rent.

Of course, there are low income families renting in all of these 'unaffordable' parts of the country but they do so at a sacrifice. They are either paying a vast amount of their income towards housing costs and forgoing other essentials, living in cheap, substandard accommodation or in overcrowded conditions. or maybe living miles from work, where housing costs are lower. With incomes for ordinary working families not expected to be any higher in 2020 than they were in 1997-98, the affordability problems of Britain’s ordinary working families look set to persist.

The report highlights the growing affordability challenge for those in private rent, as falling wages fail to match even modest rent rises in some part of the country. Renting is now more expensive than owning with a mortgage in 44 per cent of all local authorities, many of which are in the north. In the north east, for example, renting is more expensive than owning with a mortgage in all local authorities in the region and in the north west, in more than eight out of ten local authorities. But for many low and middle income families, renting privately is the only option. Social housing, while affordable in all parts of the country, is in short supply and targeted at the most vulnerable and even a 10 per cent buyer’s deposit can be difficult to save for on a modest income. Of the 1.3 million low to middle income households who now face unaffordable housing costs, close to half are private renters.

The focus of the government’s response to this affordability crisis has been the Help to Buy scheme which provides government support to allow those who cannot afford to buy with a conventional mortgage access to a high-loan-to-value mortgage or an equity loan. This will no doubt help some people to get on the housing ladder but it will do little to meet the needs of the low to middle income families who currently face the biggest affordability problems. It has become almost trite to say that the solution to Britain’s housing problem is that we need to build more homes. But without more supply, schemes like Help to Buy simply risk inflating house prices as more people come onto the market in search of a home. Estimates suggest we need more than double the number of homes that we are currently building each year. But improving affordability has to be more than a simple numbers game. We need to build more homes in the right locations and of the right type- and at the right price - not just more homes for sale or prime central London rental developments - to meet the needs of households who currently have few options. 

"Schemes like Help to Buy simply risk inflating house prices as more people come onto the market". Photograph: Getty Images.

Vidhya Alakeson is deputy chief executive of the Resolution Foundation

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How Theresa May laid a trap for herself on the immigration target

When Home Secretary, she insisted on keeping foreign students in the figures – causing a headache for herself today.

When Home Secretary, Theresa May insisted that foreign students should continue to be counted in the overall immigration figures. Some cabinet colleagues, including then Business Secretary Vince Cable and Chancellor George Osborne wanted to reverse this. It was economically illiterate. Current ministers, like the Foreign Secretary Boris Johnson, Chancellor Philip Hammond and Home Secretary Amber Rudd, also want foreign students exempted from the total.

David Cameron’s government aimed to cut immigration figures – including overseas students in that aim meant trying to limit one of the UK’s crucial financial resources. They are worth £25bn to the UK economy, and their fees make up 14 per cent of total university income. And the impact is not just financial – welcoming foreign students is diplomatically and culturally key to Britain’s reputation and its relationship with the rest of the world too. Even more important now Brexit is on its way.

But they stayed in the figures – a situation that, along with counterproductive visa restrictions also introduced by May’s old department, put a lot of foreign students off studying here. For example, there has been a 44 per cent decrease in the number of Indian students coming to Britain to study in the last five years.

Now May’s stubbornness on the migration figures appears to have caught up with her. The Times has revealed that the Prime Minister is ready to “soften her longstanding opposition to taking foreign students out of immigration totals”. It reports that she will offer to change the way the numbers are calculated.

Why the u-turn? No 10 says the concession is to ensure the Higher and Research Bill, key university legislation, can pass due to a Lords amendment urging the government not to count students as “long-term migrants” for “public policy purposes”.

But it will also be a factor in May’s manifesto pledge (and continuation of Cameron’s promise) to cut immigration to the “tens of thousands”. Until today, ministers had been unclear about whether this would be in the manifesto.

Now her u-turn on student figures is being seized upon by opposition parties as “massaging” the migration figures to meet her target. An accusation for which May only has herself, and her steadfast politicising of immigration, to blame.

Anoosh Chakelian is senior writer at the New Statesman.

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