Low-income households are battling soaring private rents while “substantial” cuts to housing benefit have made the system “increasingly irrelevant” as a means of providing adequate housing, according to new research.
The Institute for Fiscal Studies said that rent took up 28 per cent of the earnings of low-income households between 2013 and 2015, up from 21 per cent in the mid-1990s. In London the same group spent 40 per cent of their income on rent between 2013 and 2015. Low income was defined as those on the bottom 40 per cent of incomes.
The proportion of people living in private, rented accommodation more than doubled to 19 per cent in the two decades to 2015, while among 25 to 34-year-olds it trebled to 37 per cent, according to the report. Average private rents rose by a third in real terms over the same period.
The research, which was funded by the Joseph Rowntree Foundation, found that in the private sector, low-income working-age renters with children have been particularly badly affected by these trends.
Around 600,000 people in the private rented sector – 500,000 of whom are living in families with children – will face shortfalls between their housing benefit and their rent, due to cuts introduced in 2011, the IFS said.
It also said that around 4.8 million people in 1.9 million households are entitled to less housing benefit than they would have been without the cuts, by an average of £24 per household per week.
Brian Robson, acting head of policy and research at the Joseph Rowntree Foundation, called on the Government to increase housing benefits 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,” he said.
“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.”
He said more homes must be built to fix the root cause of the “broken housing market” but added that many families need help now, in the form of increased housing benefit payments.
Agnes Norris Keiller, a research economist at IFS and an author of the report, said: “The current approach effectively places most of the risk of further rises in costs onto low-income tenants, and little on the housing benefit bill.
“While containing the cost to taxpayers, it leaves housing benefit vulnerable to becoming increasingly irrelevant with respect to its purpose – maintaining the affordability of adequate housing for those on low incomes.”