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28 February 2013

We ignore the reality of housing costs at our peril

The links between housing and poverty have been ignored for too long, Kathleen Kelly argues. Continuing to do so could have dangerous consequences.

By Kathleen Kelly

Low rents are important in reducing poverty—sounds obvious doesn’t it? But a new JRF study on the links between housing and poverty shows that policy has neglected the links between housing, income and welfare.

The number of people pushed into poverty by their housing costs has increased over the last twenty years, and ignoring the reality for over-stretched renters and home owners could be perilous. Our study shows that measuring poverty before housing costs are paid ignores three million people below the breadline—that’s 5 per cent more of the UK population who are pushed into poverty after their rent or mortgage has been paid.

Even in the social rented sector (before the introduction of the bedroom tax and benefit cap), 43 per cent of tenants experience poverty once their housing costs are accounted for. Private renting is also becoming a more important part of the picture with 38 per cent of private tenants living in poverty once their rent is paid.

But what does this all mean?

With a million more children in poverty after housing costs have been paid, evaluation of cuts to the local housing allowance (housing benefit for the private rented sector) is already showing people cutting back on essentials to meet shortfalls between their housing benefit and actual rent.

Evidence from the US suggests that reductions in benefits for housing costs can adversely affect children’s health, so it’s worrying to think the US experience could happen here too. Housing makes a much bigger difference to your budget than fuel costs. In future the choice may not be between heating and eating, stark as that is, but between paying rent shortfalls and feeding your kids.

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At around £22bn a year there’s no denying the scale of the housing benefit bill; so low (or at least lower) rents are important to help Government balance the books. Of course it’s tricky to design a welfare system that sufficiently addresses housing costs which vary greatly by location. Even Beveridge didn’t really crack that particular nut.

So what can be done?

Let’s start with something easy: property tax reform. This could help stabilise the whole housing market. It could also be used to incentivise lower private rents and limit rent increases. In the social sector a more consistent and long term policy on rent levels is also needed to attract low cost finance for new homes. If tax changes are out of the question, let’s look to the Irish Rental Accommodation Scheme, which seems to have achieved lower private rents in Dublin for the long term unemployed through state and private landlord partnerships.

Housing is a crucial element of people’s living conditions and a platform to support their life chances. We need a more sustainable longer term strategy, rather than simply squeezing benefit levels in an already tight housing market and hoping for the best. There is already a fragile eco-system of benefits propping up low wages. Reducing housing benefit without reducing rents makes the risks for low or unwaged households all the more intense.

Let’s be clear. Tenants with altruistic landlords who aren’t (yet) asking for those rent shortfalls to be paid are still in a very precarious and unsettling position. I wouldn’t want to live with that worry every day—would you?