From the TUC

More and more workers need help with their rent

24 Apr 2015, by in Society & Welfare

Saving Our Safety Net Fact Of The WeekIt’s getting harder and harder for low-paid workers and their families to find the money for the rent. Official figures published today show that rents charged by private landlords rose 2.1 per cent; wages on the other hand had risen just 1.7 per cent in the most recent figures. And wages have been rising at a slower pace than rents for a long time now: over the past three years, rents were rising faster in 30 months, wages faster in just six.

Today, the Office for National Statistics published the latest figures for their Index of Private Housing Rental Prices, showing that the rents paid by tenants rose by 2.1 per cent in the year to March, up from 2.0 per cent in the year to February.  This range alarm bells and I turned back to the latest UK Labour Market figures; they confirmed that, yes, in the latest Average Weekly Earnings figures for total pay (that is, including bonuses) wages rose just 1.7 per cent in the twelve months to February.(*)

From late 2012 rent increases had been decelerating, but the pace picked up again late last summer:

Annual Change in the Index of Private Housing Rental Prices

Rents 1

The Index of Private Housing Rental Prices is a new, experimental, statistic and it has been running for just over four years. This means that we have to be cautious about over-interpreting it, but I think it does allow us to compare how rents and wages have risen over this period. In the chart below earnings and rents are both indexed, with the levels of 2011 equal to 100.

Change in private rents and total earnings since 2011

Rents 2

Rents have risen much more than earnings. So it shouldn’t surprise us to find that working families are finding it harder and harder to pay the rent. The government’s Housing Benefit Caseload Statistics show that the number of people in employment who have to claim Housing Benefit has risen steadily since the recession:

  • In November 2008, there were 430,000 HB claimants in employment
  • By May 2010 this had risen to 650,000
  • In November 2014 (the most recent figures) there were just under 1.1 million

And the proportion of claimants who are in employment has risen too:

Proportion of working age Housing Benefit claimants who are in employment

Rents 3

This is the proportion of all HB claimants. In fact, one-and-a-quarter million HB claimants (26 per cent of the total) are over 65. Comparatively few will be employed, so the proportion of working age claimants who are in employment will be round about 30 per cent. Not only has the number and proportion of HB claimants who have jobs been rising, the rent increases have meant that the amount they need to claim has gone up: from £72.38 in November 2008, to £92.74 in November 2014. In fact, HB claimed by working families has risen 28 per cent during this period, higher than the 21 per cent increases for HB claimants generally.

So we have a situation in which rents are going up faster than earnings, more and more workers need to claim Housing Benefit and the amount they need to claim has gone up.

What has the government done to help?  Not much, in fact, we have seen a series of cuts that make life tougher for low-earning working families with rents to pay:

  • In 2011, they ended the previous government’s freeze of HB non-dependent deductions (the amount deducted from your benefit because its assumed that grown-up children and other ‘non-dependents’ will pay you rent).
  • In the same year they introduced caps for the level of the Local Housing Allowance, used to calculate rent that qualifies for HB.
  • In 2012 they cut the LHA again, and set it at a maximum cash value.
  • In 2013, they introduced the Bedroom Tax – reduced rates for people deemed to have more bedrooms than they needed.
  • In the same year, they switched to raising claimants’ HB by the CPI measure of inflation – regardless of what was actually happening to rents locally.

And, of course, from April 2013 we have had the Benefit Cap. As we’ve already seen in this series, 73 per cent of the people hit by the Benefit Cap are children. TUC-commissioned research has shown that 58 per cent of the benefit cuts will hit low income working families. David Cameron says the Conservatives are “the true party of working people” but, time and again, it is working families that are hit by the welfare cuts.

 

 

(*)This is using the three-month average figure, which is less volatile than the one month figure – using that figure the contrast is even stronger, with an increase of just 1.3 per cent.)

2 Responses to More and more workers need help with their rent

  1. Postkey
    Apr 25th 2015, 9:55 am

    Hello,

    It appears that the index produced by ‘homelet’ {for average rental values for new tenancies} gives a different ‘picture’ to IPHRP?

    http://homelet.co.uk/assets/documents/M3692-March-2015-HomeLet-Rental-Index-14.04.15.pdf

    This is what ONS said
    “The figures you quote below relate to new tenancies only – so this represents the flow of new rents into the market where typically inflation will be higher. The IPHRP is a stock based measure, so it is measuring the inflation for those already in rental agreements, where typically the inflation rate will be lower (as most tenants are tied into contracts of between 12-24 months so see very little increase in rents. Evidence suggests that landlords, in the current market, are keen to keep on good tenants so even at the end of contract renegotiations, prices are not increasing substantially).

    We have been reviewing the methodology used in IPHRP and will be introducing some improvements in early 2015.”

  2. £12 billion of benefit cuts will do a lot of damage – ToUChstone blog
    May 27th 2015, 11:55 am

    […] on the side of hard-working families, but it could produce substantial savings. The proportion of Housing Benefit claims that are by people in work has been rising steadily and is now about one-in-four. A research report published by the TUC last […]