Poverty prism

Who said this? ‘What is currently happening in the housing market epitomises our concerns about Britain becoming a permanently divided nation.’

This is not a quote from a housing pressure group or a think-tank or even an article in Inside Housing. Instead it is the verdict in a report published on Monday by an official government body: the Social Mobility and Child Poverty Commission.

The advance headlines ahead of its annual State of the Nation report were about the ‘under-30s being priced out of the UK’ and much of the coverage after that went to the commission’s criticism of Labour’s plans on the minimum wage and its proposal to ban unpaid internships. However, read as a whole the report gives a fresh perspective on problems that are all too familiar to anyone in housing.

That perspective comes from its unusual status as an advisory non-departmental public body with a remit to advise the government and others on child poverty and social mobility. It was established under the last government’s Child Poverty Act 2010, which set binding targets on future governments to eliminate child poverty by 2020.

The coalition’s record on child poverty is mixed so far and how you consider housing makes a big difference. The most commonly used measure, relative poverty (that is, relative to other incomes) before housing costs, improved in the three years to 2012/13 thanks to rising employment and the fact that benefits were stable at a time when real wages were falling. However, progress on this has stalled and high housing costs dragged an extra 1.4 million people into relative poverty after housing costs were taken into account.

The Commission concludes that ‘changes in the housing market are already increasing poverty and are threatening to become a major impediment to social mobility’. The number of children in absolute poverty (unable to afford a basic standard of living) after housing costs has risen by 450,000 since 2009/10. This has been ‘almost entirely driven by an increase in working poverty’ and the Commission says the biggest factor in this is the shift of families with dependent children from owner-occupation to the more expensive private rented sector. The proportion renting privately has doubled in the last ten years.

The report sees four implications in these ‘startling changes in the housing market’:

• Lower relative living standards for some families, with private renters paying 40 per cent of their average income in rent but mortgage holders paying 20 per cent.
• A rising proportion of the population not benefitting from record low interest rates
• Reduced stability for families: in 1999/2000 three-quarters of those with children who were renting had a social tenancy but in 2012/12 less than half did.
• A delayed transition to adulthood and increased inequality between generations as young people are locked out of ownership and parental help becomes ever more important to getting on to the housing ladder.

The Commission argues that what’s happening in housing challenges ‘the very terms of the debate’ about child poverty and social mobility:

‘Changes in the housing system complicate what social mobility means, with risks that, even if children from less advantaged backgrounds do well at school and find a good job, they will find themselves trapped for the long-term in shared, expensive and insecure private rented accommodation, unable to start a family and worse-off than both their parents and their peers from more advantaged backgrounds.’

And it says the next government must give housing greater priority: ‘The new objective for housing policy should be that it contributes to more social mobility and less child poverty’. There should be action to make longer-term tenancies the norm, boost housing supply and make shared ownership a real option for people who are priced out of the market without assistance from their families. Private renters are missing out on both security and asset accumulation and face support for housing costs becoming detached from actual rents and it’s unclear to the Commission whether the current voluntarist approach is having much impact on longer-term tenancies. 

All of these points will be familiar to people working in housing but they take on a different meaning when put through what the report calls a ‘social mobility prism’. The Commission sees action on housing as one of five key recommendations to meet the ‘2020 challenge’. The others are credible plans for deficit reduction, recoupling earnings and economic growth, boosting growth in the regions and setting out a ten-year ambition for the UK to become a Living Wage country by 2025.

However, to view that through a housing prism, the Living Wage assumes that families with children have access to social housing. That makes it curious that the report does not say more about boosting supply of social housing or protecting what already exists.

As things stand, progress towards the 2020 child poverty target is about to go sharply into reverse. This report only measures progress up to 2012/13. That means it does not reflect all the cuts in benefits and tax credits that applied from April 2013. Publication of the 2013/14 data is currently scheduled for June 2015, a convenient month after the next election.

And we are still only halfway through austerity. The Commission argues:

‘It is hard to see how savings on this scale can be made without seriously affecting the public services that aim to level the social playing field and the income transfers that have propped up families in work and out of work. Yet there seems to be an emerging consensus between the main political parties that fiscal consolidation on this sort of scale will be necessary between 2015 and 2020.’

That is a matter for each of the political parties but:

‘What appears hard to square, however, is their shared desire to reduce poverty and speed up mobility with their eye-wateringly tight fiscal plans. None of the main political parties has made much effort to reconcile the social ends they say they want to achieve with the fiscal means to which each of them is committed. There is a need for more honesty about the implications of planned public spending cuts from all the political parties.’

The report warns that protecting benefits for pensioners will make the cuts far worse for everyone else. With most working-age benefits now rising by just 1 per cent a year (and the Conservatives pledging a freeze to follow that) poverty is set to worsen in the rest of this decade.

Far from eliminating child poverty, experts predict we are now on course for the first decade since records began in which absolute child poverty increased. And a housing system that will become the symbol of a permanently divided nation.