Wednesday, 16 April 2014

Private rents 'unaffordable' in most of country

Average rents in the private sector are unaffordable for ordinary working families in more than half of local authorities in England, research shows.

The housing and homelessness charity Shelter released findings from its rent watch which showed that in the majority of councils, typical rents from private landlords were over a third of average take-home pay.

Rural areas are among the worst hit with findings showing that it is now more affordable to rent in Manchester, Liverpool or Birmingham that it is to rent in north Devon, north Dorset or Herefordshire.

London boroughs were the most expensive, with the average rent for a two bedroom home at £1,360 – almost two and a half times the average in the rest of the country (£568).

The least affordable local authority area outside London is Oxford, where typical rents account for 55 per cent of average earnings.

Shelter is calling on the government to take urgent action to stabilise the private rental market and develop policies to bring rents in line with average earnings.

Campbell Robb, chief executive of Shelter, said: ‘With huge differences in affordability across the country, there are now worrying signs that families are likely to be displaced by our out-of-control rental market.

‘Over recent years we have seen more and more people forced into renting, as high house prices and a lack of social housing have made it the only option for thousands of ordinary families.  

‘What we’re seeing now is that renting is no longer the easy, cheap alternative to home ownership.

‘We have become depressingly familiar with first time buyers being priced out of the housing market, but the impact of unaffordable rents is more dramatic.

‘With no cheaper alternative, ordinary people are forced to cut their spending on essentials like food and heating, or uproot and move away from jobs, schools and families.

‘With rural areas suffering just as much as cities - or in many cases, even less affordable - it’s no longer enough to encourage people to move out of crowded urban areas.

‘Government must urgently consider how private renting can become a stable, affordable option for families, and not a heavy financial burden that makes parents choose between buying food for their children and paying the rent.

‘This should be the wake-up call needed to finally take action to address our renting crisis.’


Readers' comments (81)

  • F451

    The situation concerning affordability was worse of course before social housing was introduced. Because people had no choice but to live in a home provided by either their employer, or some other private landlord, they either paid the going rate of lived on the streets.

    Many ended up sharing a house that was divided into as many rooms as it could hold, some even sharing that room on a 'timeshare' basis by pairing up with an opposing shift worker so each could sleep whilst the other worked. Whole families lived like this, barely existing and never able to amass the funds to improve their situation.

    Is this really the model being followed in this 'modern' age? Or is Shapps's ideal to follow the Maltheus idea, consigning the poor to ever more choking ghettos until through pressure of numbers and crushing poverty the 'problem' resolves itself?

    The policies that he is pursuing seem little to do with improvement, options, and choice. More disablement than enablement. Unless of course you are a property owner. Then you are enabled to convert that property into as many rooms as it may hold and rent it out for as high a rent as you can get away with, and no government busybodies to oversee nor regulate your practice. Is this really the way to solve the housing shortage!

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  • Shelter need to consider the private rented market forms a function and private landlords should not be regarded a providers of social housing. It is a market driven form of housing. The constant drive of legislation, epc's, landlord registration etc only goes to increase cost. the HMO legislation drove many landlords from the market, this reduces supply and increases rent. I was in the profession in the 1970's where strict rent control meant landlords could not afford to repair their properties and the county's housing stock fell into decline. Council housing and housing associations should be providing affordable housing as shelter would put it. OR low earners should not be taxed so highly! Going back to the days of rent control will revert to landlords coming out of the market and back to the days when there was no mobility in the population - this would strangle the mobility of the work force. I am old enough to remember when it was nearly impossible to rent - YES - nearly impossible due to the controls placed on rent under the Rent Acts. It is time shelter got off its left wing tack and acknowledged the private rented market does a fantastic job where the state failed. I have seem many shabby badly maintained council properties due to budget constraints whereas the private rented market has generally raised standards of maintenance and quality of housing except for a small section of poor landlords who have to accept lower rents. So cut the rubbish of statistics and get real.

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  • F451

    I do not want to decry your memory Geoff - but I would ask if others share it, or if they share this memory of mine of the same period you quote.

    Private landlords were very few, providing two niche markets of executives with temporary contracts and students in shared accomodation.

    The majority of working people obtained housing either by buying it, or a significant minority rented their home for the local council. There was also a small but successful RSL sector meeting specific and special needs.

    People waited weeks (yes weeks) for housing because of the plentiful supply. Tenants wanting an exchange simply posted a card in a shop window near where they wanted to move to, and invariably found a match almost immediately. Access, availability and flexibility were no problems, and housing was well maintained, normally by an in-house council worker who had all the tools he needed in a box on the front of his bycycle.

    Rent were highly affordable, about a 10th of current social rents in real terms, and this enabled tenants a decent standard of living, including annual holidays, on a single household wage.

    The shabby conditions may have been in the private sector, and may have been because of rent controls. Perhaps arguing to ease such controls may have been better than the solution that was bought into play.

    Councils were banned from building and RTB ensured half the stock disappeared. Rent subsidy was successively reduced to such a degree that landlords could no longer afford to capitally repair the homes (hence the decent homes funding being required), and to such a degree that lately rents have raised more than the landlords recieved to manage thier homes.

    It is the past 30-years of policy that has given rise to the housing situation that matches your memories of 40-years ago.

    I'm sure that there were areas in Britain where waits for housing were longer, repairs not as good, and being able to trade down or trade up the size of your home was not as simple - but the memory I quote was real and experienced in the Essex community where I was a tenant at the time.

    The statistics of housing by tenure for the 1970's also show virtually no private landlords compared to a massive social sector, which would tend against the memory you are calling upon Geoff - are you sure that you do not mean the 90's?

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  • F451, your comments are interesting and from a different perspective. Private landlords did not enter the market for social housing which is the function of councils and housing associations so there should be no cap. failure of housing associations and councils to keep up with demand have used private landlords to top up their failing supply. The problemsresults not from the private rented sector but the politics of RTB which is where the supply of social housing was depleted. The incorrect policy of not allowing councils to re-invest in home building had a significantly adverse impact on supply of social housing. In the 70's 80's your are right that easy inter council transfers were easy, but be outside of the council housing criteria you had to buy - virtually no choice to rent. Councils have forced developers to provide around 35% of the developments over 12 units for social housing - effectively a payment for granting planning consent - planning gain as it is called. which is where some social housing is being provided by the private sector. Private landlords are there to supply those who can afford open market rents. Housing Associations for social housing and those in between with their shared ownership schemes. RTB, was a political scheme to get votes, caused shortages. Rent capping is wrong as landlords did not invest in a open market to provide social housing, although many do. You don't subsidise bread, water, gas, electricity, or other essentials - there is no justification to subsidise rent in private contracts. Housing Associations need to meet the social housing demands it is not the function of private landlords.

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  • Jono

    Geoff is correct.

    F451 and similarly mistaken posters - again as much as you would like my case to be inconsistent, you are simply wrong.

    Joe & McLoony - let's turn to you first. If affordable rents are 80% of market rents - are they more or less affordable than the market rate for letting a property? Clue - less (I'm sure you will accept 80% < 100% - or will I have to put as much effort into defending that fact of logic?). Therefore anyone who rents one, rather than the alternative (100%) is incurring less cost. Simple conclusion based on the facts. Pesky I know - but it stands whether the private rent is £112.76 per week or something else (can you resist the urge Joe?).

    Where does it say providers have to set rents at 80%. I'm sure when originally launched the criteria was stated to be up to 80% - meaning providers can ask for less. I know of one major housing provider who intends to charge considerably less for some units. You are assuming they all will be but let's wait and see. I say this in response to your points - not because I am a fan of the affordable rent model (I'm not, for different reasons).

    F451 - again you are celebrating a loss as if a victory. For the reasons I have given previously (and on other articles) a rent cap COULD be to the detriment of any given landlord (economists and other professionals agree with me on both sides of the political spectrum as I proved previously - so I'm in good company). As it would be forced, it would be unavoidable - there is no voluntary element involved - no negotiation, no honouring of contractual agreement, and a violation of the principle of mutual consent (incidentally, to join a family of other non-consensual acts. Can you think of some which involve unwilling participants?)

    If the landlord had committed a crime against the tenant and doing this was restitution then maybe you would have an argument. As it stands, private landlords are guilty of no offence, and should not be forced to pay for the circumstances of the tenant. As I have said numerous times before. And will again if pressed.

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  • F451

    Thanks Geoff, you are indeed correct to state that the politics of RTB (and the failed individualist philosophy that came with it) is the cause of todays problems.

    I agree with your description of what the role of private landlords should be. However, we have to face the fact that the outcome of the lunatic tendancy is that we now have a substantial level of social need being met through market renting, subsidised by the benefit system. That is the area where I'm keen to remove the profiteering element so supported by the like of Jono and those he sheepishly follows.

    The real solution is to reinvest in social housing on a scale that reverses the 2.5Million lost units, and takes this beyond to put in place the further 1.5Million that should have been provided. This, in itself, would act to curb the excesses and exploitation within the private sector.

    By the way, the price of wheat is subsidised to ensure bread costs remain stable. The utility companies still receive government sourced funding, as does the transport and freight industries, and all small and medium sized businesses, new starters included. Tax funded subsidy is in most sectors - so why not housing?

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  • Joe Halewood

    Jono - 80% is less than 100%

    100% is Gross Market Rent or GMR which was £164.55 pw when original figures produced for illustration.

    At the same time:

    Council rent of £71.14 is 43% - hence AR is an 85% increase
    HA rent of £80.11 is 49% - AR is a 64% increase
    Regulated PRS rentt of £79.45 is 48% - AR is a 66% increase
    (Unregulated) LHA of £113.74 is 69% - AR is a 16% increase

    All of the above are LESS than the comparable AR social housing renting model (ie ones thats covers benefit payment) of £131.64 which is the 80% figure.

    3.11 of the Affordable Homes Programme Framework document - the official guidance - says that the 80% figure cannot be used where it exceeds the HB caps

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  • Jono

    Thanks Joe - so basically you agree with me that affordable rent is more affordable than unregulated market rent, but want to point out that affordable rents are not the lowest rents. Fair enough.

    F451 - "The real solution is to reinvest in social housing on a scale that reverses the 2.5Million lost units, and takes this beyond to put in place the further 1.5Million that should have been provided. This, in itself, would act to curb the excesses and exploitation within the private sector."

    And who is going to pay for this £400bn new homes development? All the nasty rich people is it Chris? It must be cloudy where you are!

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  • F451

    Why do you refer to rich people as nasty Jono - that is not very nice of you, and is also tarnishing a group of people without any grounds - I do hope you will retract the comment. You do struggle to keep a handle on that other side of your personality, don't you (by the way, that is not a question as I know you struggle to find answers!)

    As to where may the funds come from (you see I do attempt to answer questions), that would be from, for instance, using existing funds in a way where they may be recycled rather than just given as one off payments or subsidies; alternative prioritisation of existing budgets to support the investment in housing development and then using the extra economic growth that would result to restore funding previously redirected. It's hardly rocket science - indeed, if there were a war or two called tommorrow the government would have identified the money to fund it by tea time!

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  • Jono

    F451 - well done for attempting to answer questions - but the next challenge is to answer the question put to you!

    Yes you would recycle part of the £400bn (what part?) - and who would pay for the initial investment? You still haven't answered the question. Alternative prioritisation does not answer who will pay for it either.

    I was right - it is cloudy where you are!

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