Rent 'unaffordable' for low-income families in third of UK

2013-07-15 08:27:41

The report comes from the Resolution Foundation, which campaigns on behalf of

low to middle-income families.

It says most of southern England is now beyond the reach of less affluent

households.

The housing minister said the report was "factually flawed" and failed to take

housing benefit into account.

With social housing usually unavailable and home ownership unaffordable for

many first-time buyers, renting privately is often the only option for

households on lower incomes.

A BBC housing calculator also identifies how renting a modest two-bedroom home

for less than 700 a month is almost impossible in London and much of the South

East. Modest is defined as having a rent below 75% of similar properties in the

area.

BBC housing calculator

Renting example

Lets you see where you can afford to live - and if it would it be cheaper to

rent or buy

Enter how many bedrooms, which end of the market and how much you want to pay

each month

As you move the payment slider, parts of the UK light up to show you where you

can afford

Based on pricing and rental data from residential property analysts Hometrack

BBC housing calculator

The Home Truths report identifies local authorities that are "affordable" for a

couple with a child requiring a two-bedroom property on a household income of

22,000 a year. Affordable is defined as a rent that is no more than 35% of net

household income.

On that basis, 125 of 376 local authorities in Britain (33%) are unaffordable

for less-affluent working families.

"The private rented sector is now, in large parts of the country, the most

expensive form of housing," says Vidhya Alakeson, of the Resolution Foundation.

"It is also the only option for most low to middle-income households, many of

whom are faced with the unenviable choice of forgoing other essentials in order

to pay for housing or living in overcrowded conditions to reduce their housing

costs."

Housing Minister Mark Prisk described the report as "alarmist" as it "suggests

rents are soaring when in fact they have fallen in real terms".

"And it fails to recognise that housing benefit provides a safety net which

ensures that up to a third of private properties in most areas are affordable

to low income families," he said.

The BBC housing calculator also allows users to see where they can afford to

buy a house. A deposit of 10,000 is only enough to buy a two-bedroom home in

41% of local authorities, because a deposit of at least 10% is needed to get a

mortgage.

With a deposit of 20,000, almost 30% of the country remains unaffordable,

including all of Greater London and much of the South East.

Housing Blue = affordable | white = not affordable | grey = no data

Line

Even with a 50,000 deposit, central London and areas to the south and west of

the capital remain unaffordable. Analysts suggest recent rises in UK house

prices have been driven by increases in London and the South East.

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Londoners say they spend half their salaries on rent

"Home ownership is out of reach for the vast majority of low to middle income

families because few have the savings needed for a deposit," says Ms Alakeson.

"While the crisis in London is well documented, there are affordability black

spots in almost all regions of the country."

The government recently announced a Help to Buy scheme, offering loans for

people moving into new-build homes worth up to 600,000. Another government

scheme to assist those buying new-builds and existing homes is due to come into

force next January. And shared ownership schemes provided through housing

associations are also available to some first-time buyers.

The housing minister said the government had put a range of measures in place

to create "a bigger and better private-rented sector", including the 1bn Build

to Rent fund and 10bn in loan guarantees to build new homes specifically for

private rent.

"And for those looking to buy, the numbers of towns which are affordable for

first-time buyers is at its highest since 2002, thanks to schemes like Help to

Buy which enable people to buy newly-built homes with a fraction of the deposit

they would normally require," he added.

However, there are concerns that without a significant increase in housing

supply, additional demand generated by such schemes will push up house prices,

exacerbating the problem of affordability.

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Affordable is defined as a rent that is no more than 35% of net household

income

The latest figures show that in the year to last March, just over 108,000 new

homes were completed in England. But this is less than half the number needed

to meet demand.

Homelessness is on the rise with more than 55,000 households in temporary

accommodation in England - 10% higher than a year before. More than 1.8m

households are currently on the waiting list for social housing - a 60%

increase in the last 10 years.

The Mayor of London, Boris Johnson, has described the shortage of affordable

housing as "the gravest crisis the city faces".

In his plan for the capital, 2020 Vision, published last month, Mr Johnson

writes that high house prices have had "brutal consequences for many

Londoners".

"Fewer and fewer take out mortgages in the way that their parents did, because

they simply cannot afford the deposit," he says. "Rents are now punishingly

high, and pre-empt an ever growing proportion of your disposable income."

There are concerns that London is pricing out the key workers it needs to

function.

Cost to income ratio for a low income couple with one child

Private rent map

This map is for a couple with one child at the 35th percentile of the household

net income distribution, living in a two-bedroom property at the cheaper end of

the local housing market.

Source: Resolution Foundation analysis of Hometrack data 2012/13

Responding to the Resolution Foundation report, the chief executive of the

housing charity Shelter, Campbell Robb, said families were paying so much for

housing that "they're forced to choose between putting food on the table,

turning on the heating or paying their rent".

"Shared ownership schemes are one of the best ways to offer low-income families

an affordable place to live. We need to see more schemes that are affordable

for low-income families and that give them the stability and security that our

current rental market sadly doesn't provide."