One of the largest contributors to poverty is the growing costs of housing. Today we heard from the Living Wage Commission that, in the last five years, the costs of housing has risen by one and half times the rate of wages. Hardly surprising then that people can’t keep up with it.
Once housing costs are included, an additional 3.1 million people register as living in poverty. The problems don’t stop there: pumping out some £23bn of housing benefit a year plays havoc with work incentives for those entering or progressing in work; rules prioritising the needs of local residents in the social housing queue impairs labour mobility.
Few would disagree – or did disagree at our JRF sponsored event on this topic today – about the need to boost the supply of housing as a response to the affordability problem. 300,000 additional homes a year came out as a reasonable goal. But quite aside from whether politicians can overcome the entrenched political barriers to actually get these homes on the ground, this is a long-term solution with only incremental gains to the affordability of homes. We might be at a tipping point when the dispossessed exert their disquiet – but they shouldn’t hold out for such changes to allow them to spring onto the housing ladder any time soon.
What then for the more immediate future?
Here the prospects are interesting. First, the so-called ‘cost of living crisis’ certainly gives spur to consideration of rent regulation. After all, if so few are building homes at the moment then there is little investment to be alienating. It might be a short-term measure – but if you can do a freeze and re-set with energy prices, then why not with rent levels?
Then there is the hot topic of wage regulation. This is often strangely blind to the variation in housing costs across the country. The National Minimum Wage, as a country-wide rate, ignores the problem entirely. While the Living Wage captures the sharp divergence between the average London housing prices and the average outside, it overlooks the wide variation outside and within. Given that the disparities are severe within London and within the regions outside London, this is problematic. In Hull, you have to work 13 hours at the National Minimum Wage to afford to rent the average one-bed flat. In Winchester you have to work 26 hours; in South Bucks you have to work 29 hours – the same as in the London Borough of Hillingdon (for interest – the figure for Kensington and Chelsea is 69). For a wage level determined bottom up – by establishing the needs and costs of living – this is problematic. This is something to ponder on.
A further short-term measure would be to make more of what we’ve got. An apparent 15 million bedrooms sit idle in owner-occupied properties. A tax incentive exists to encourage homeowners to let out these spare rooms – but it is little-known and probably insufficient. Older people – who own a disproportionate share of the housing stock – rarely downsize. Part of this is likely to be emotional attachment to the large, drafty family home; but many probably guess (correctly) that they’d be better to underuse an asset that is appreciating strongly than downsize. But, couldn’t there be a financial product that allowed them to retain a financial stake in the value of the property whilst also enabling them to move to more appropriate accommodation?
Then there is the mess that is property taxation – outdated council tax bands; incentives to speculate in the housing market through capital gains tax relief; stamp duty getting in the way of potential downsizers; the list goes on. But that topic will have to be for another day.