The UK's poorest hit hardest by higher rents
Author: Rent Guarantor
A new study suggests that inequality across the UK is rising, thanks to higher rents and lower mortgage interest rates. The Resolution Foundation said that higher rents have hit the poorest Britons hardest, as this group is more likely to live in rental accommodation.
The study also adds that housing is now a major concern, with one-in-five people stating it’s among the most important issues facing the UK, right now. Indeed, housing costs now account for more than double of low-income families’ budgets than they did in 1980.
Higher housing costs wipe out 90% of living standards gain
This latest study from the Think Tank highlights that rising housing costs, particularly rents, have meant that improved living standards among lower income families have been almost completely reversed.
Specifically, the study shows that:
- Home ownership among 25-34 year olds with families have halved from its 50% peak in 1989 to 28%.
- In 1980 the poorest families spent just 15p of every pound on housing costs, that has more than doubled to 40p.
- Low-income families are now £1,200 worse off per year than they were in 2002, due to higher housing costs, namely, rent.
- A combination of higher rents and lower benefits have wiped out 90% of living standard gains among low earners.
- In the meantime, high earner families are £400 better off as their housing costs have fallen in real-terms, since 2002. This imbalance has led to growing inequality between high and low-income families.
“In this election, politicians know that housing is an issue close to many people’s hearts. Young people in particular, many locked out of buying their own home, may welcome proposals to build more in high demand areas,” said Daniel Tomlinson, Research and Policy Analyst at the Resolution Foundation.
“But political parties also need to address the legacy left from forty years of higher housing costs. As incomes have not risen at anywhere near the same pace as housing costs, families have dedicated a greater share of their income to housing. This burden has landed most heavily on low-income families, particularly in recent years when housing costs have actually fallen for higher income families,” Tomlinson added.
A three-pronged housing crisis
The Resolution Foundation also points out that rather than the current housing crisis being made up of one element, it’s actually three crises in one:
- Low home ownership.
- High housing costs, including still rising rents.
- An acute disaster for low-income families, who face lower housing benefits while housing costs rise.
Of course, the reason for those higher housing costs aren’t something that can be easily or quickly rectified. While building more homes would help alleviate the high price of buying a home in some areas, that type of approach must be managed carefully. Afterall, no-one wants to preside over a housing market crash where the value of millions of homes plummets over a short period of time, leaving home owners paying for a mortgage while also being in negative equity.
Right now, rents are high and rising for two key reasons; the high level of house prices and high and still rising demand for rental homes. In this scenario, if more rental homes were built, that were genuinely affordable for the lower income families, then this could have a positive effect on the current high housing cost problem facing those lower earners.
However, as it stands, the Private Rental Sector continues to house many low-income families and those landlords only tend to advertise rent at the local market rate. Due to the high cost of rental housing, some landlords are turning to different ways to make it easier for tenants to afford their rent, or to make it viable for them to keep rents unchanged for longer.
One of the ways landlords are gaining confidence that tenants, including those who are on benefits or low incomes, will always pay their rent is through the use of rent guarantor services, like ours. Rather than relying on friends and family, this rent guarantor option is a more business-like option that will likely appeal to both landlords and tenants.
As a landlord or tenant, you can’t control house prices, but you can make use of new options to help make renting a more reliable experience for both parties.