Housing affordability and policy
change: impacts on wellbeing in
the UK
Christine Whitehead
Professor Emeritus in Housing Economics, London School of
Economics
Illuminating the black box of housing and
health
ARC sponsored Symposium, Barossa Valley
University of Adelaide
21- 23 September, 2015
Logic chopping
• What included in health? Physical and mental; short term and long
term; but also disability?
• What included in housing? The dwelling, the neighbourhood, the
location, homelessness?
• Housing and location have direct physical impact on health – damp,
asbestos, other construction materials, bacteria, pollution, disasters
etc;
• Housing has more complex impacts through occupation levels,
security, suitability of design for family living, financial stress etc;
• Health has a direct impact on housing choice, location and housing
conditions;
• Health has indirect effects on housing via through impact on length
of life, capacity to earn, types of employment etc;
• Main link in terms of seriousness of negative impacts between the
two – in both directions – is poverty and affordability;
• But also issue of high quality housing and its impact on wellbeing of
better off households.
Traditional Findings
• Negative externalities of poor housing and by implication negative impact
on occupants restricted to extremely poor quality housing and dealt with
by regulation and infrastructure investment – public health and fire
prevention more important than housing per se but building regulations
also fundamental.
• The vast majority of negative impacts are linked to poverty (or
emergencies) with these being the major causal factors rather than
housing per se;
• Historically as standards rose through regulation this increased costs
against unequal income distributions, legal housing became unaffordable
for many. Result was unaffordable housing, avoidance and evasion; rent
controls; and subsidies to improve affordability;
• Majority of work done in Northern countries where issues around
cold/damp/energy efficiency – and homelessness - have dominated.
Ensuring Housing Affordability in the UK
•
Supply side:
– Revenue and then from 1988 capital grants for new social housebuilding;
– Residual subsidies and then capital grants for existing social housing stock to ensure
affordable rents and improvement to modern standards;
– Various forms of rent stabilisation related to cost, value and inflation;
– Allocations to lower income ‘deserving’ households and then from 1980 increasingly to
very poor and vulnerable – single parent and large families; those with problems with
health and disability; elderly; vulnerable singles.
•
•
Demand side:
– from early 1970s open-ended income related housing benefits (HB) to all
eligible low income tenants;
– increasingly constrained for private tenants and singles from mid 1990s;
– Now some constraints on HB for social tenants since 2011 – ‘bedroom tax’
and welfare cap.
Homelessness legislation in place from 1977 for families and vulnerable
households
– initially local authorities required to house in own accommodation;
– then to find secure accommodation in social housing; and now
– to identify suitable accommodation – not necessarily with security of tenure.
Changes in tenure structure in England since 1981
Owneroccupation
%
Private
rented
sector %
Housing
Local
Associatio Authority
n/RP %
%
Total stock
(m)
1981
59
11
2
27
17.9
1991
68
9
3
20
19.7
2001
70
10
7
13
21.2
2011
64
18
10
8
22.8
2014
63
20
10
8
23.4
Source: DCLG Live tables
Social Housing Supply: Access, Affordability and
Standards
1. A Central Role for Housing Associations?
• Housing associations (HAs) have been the main builders and
increasingly the main providers of affordable housing since 1989;
• Funded by grant and capacity to raise funds cheaply on the private
finance market- safety net of HB and regulation;
• Large scale voluntary transfers of local authority stock to HAs by
tenant ballot, normally through management buyout – including
capacity to improve quality of existing stock;
• But grant has nearly disappeared so HAs must generate own resources
and charge higher rents to fund additional housing, reducing
affordability for those not on HB;
• Changing terms and conditions –
– initially lifetime security from day 1; then
– trial period;
– Localism Act 2011 includes fixed term tenancies.
.
Additional affordable homes provided by type
of scheme, England
80
70
60
Thousands
50
40
30
20
10
Social Rent
Affordable Rent
Intermediate Rent
2013-14
2012-13
2011-12
2010-11
2009-10
2008-09
2007-08
2006-07
2005-06
2004-05
2003-04
2002-03
2001-02
2000-01
1999-00
1998-99
1997-98
1996-97
1995-96
1994-95
1993-94
1992-93
1991-92
0
Affordable Home Ownership
Affordable housing is the sum of social rent, affordable rent, intermediate rent and low cost home ownership.
Source: Live Table
1000
2.
The Affordable Rents Regime
• Introduced in 2011 by the Coalition Government in
response to capital grant reductions - to enable continued
investment programme;
• Rents up to 80% of market rent, for most new build and
some transfers on vacancy - giving increased capacity for
HAs to borrow (NRAS a relevant comparator?);
• 170,000 plus units provided by end 2015 with around 50%
contracted at Affordable Rents;
• Similar scheme from 2015 – 2018, extending to 2020;
• Will maintain some scale in social sector output – but
increasing emphasis on partial ownership. HA Right to Buy
may lead to some decline.
3. Impact on Tenants
• Improvement of social sector stock through subsidies to
achieve Decent Homes Standard in LA and HA sectors;
• Targeting allocations at more vulnerable households;
• Rent stabilisation– social rents vary from around 30% of
market in London to 80% plus in some low demand areas;
• Regulated relativities with respect to dwelling size have
favoured larger family households;
• Affordable rents higher- but still less than 50% in London;
• Rents eligible for Housing Benefit although increasing
(although still relatively limited) welfare constraints – different
story in the private rented sector;
• More limited security of tenure for new tenants in social
sector (anyway very limited in the private rented sector).
Housing Benefit, Welfare Support and Housing
Affordability
1.
The Role of Housing Benefit
• Social security a UK wide system with fixed rates – so those in low cost
areas do better;
• But housing costs vary too much across the country to make fixed rates
feasible - varying housing subsidy allowed governments to help those
with high housing costs while keeping down the costs of social security,
initially through rent subsidies and then with income related subsidies
across the rented sector;
• HB based on individual rents and household circumstances and on the
assumption that household could not move to reduce housing costs;
• Available to any household which could find a rented home;
• Structure ensured minimum income unaffected by housing costs – but
negative implications for tenants from high marginal ‘tax’ rate as
incomes rise - and for government because of increasing subsidy bill;
• Result has been that that UK had relatively little housing poverty – but
overall social security ungenerous so UK overall poverty rates high;
• However the story has been changing for some years.
2. The Changing Housing Picture
• Increasing emphasis on vulnerable households in the social
rented sector - 50% plus of HA income comes from HB;
• Increasing size of the private rented sector (PRS) – doubling in
a decade with higher rents and very limited security;
• Increasing policy role for the PRS in housing homeless and
poorer households with little additional support;
• Increasing rents in the PRS as housing markets tighten,
pushing HB way up the income scale;
• Large numbers of owner-occupiers without a mortgage but
access to owner-occupation heavily constrained unless bank
of Mum and Dad;
• Income inequalities and intergenerational inequalities
becoming more stark – although very poor have been
protected by real increases in welfare payments.
3. Government Responses
• Restricting household eligibility – mainly affecting younger single
households;
• Limiting eligible rents - the introduction of the local housing
allowance (LHA) restricting eligible rent to 50% of the local market
and now 30% - and social sector rents capped at LHA - so many
have residual incomes below social security minima and increasing
fear of evictions because of rent arrears;
• Limiting the size of dwelling for which HB available – the ‘bedroom
tax’; - requiring households to pay a flat rate for an ‘additional’
room or move to smaller unit;
• Limiting absolute amount of welfare payment initially to about
median income and now to £23,000 per annum in London and
£20,000 elsewhere – which can avoid by moving into employment;
• Freezes on general welfare payments; and now
• Cuts of 1% pa in HA rents for 4 years.
4.
Impact on Tenants
• HB restrictions hardest on young – sharing; living with parents; sofa
surfing – not only among poorest;
• Welfare cut effects relatively limited in short run because of Discretionary
Housing Payments and LA/devolved government responses;
• Many have been exempted for disability and health reasons;
• Most have tried to pay bedroom tax –very little mobility except in North;
• Large numbers have moved on to work based benefits by getting 16 hours
employment – some very positive messages around work incentives – but
also some negative – including types of job;
• Growth in support mechanisms/mentoring by HAs, LAs, Job Centres etc;
• More understanding of mental health and other problems as more
relational management by HAs;
• Growth in food banks (often used by working households) - but more in
Germany?
• Longer term effects of welfare freezes, reductions in welfare cap and
limiting increases in rents to CPI;
• Potential effect of Universal Credit.
Impacts of £23k Cap in London Given Mean Net
Rents and Mean Affordable Rents
Social Rent
Household
composition
Lone parent JSA
Couple - JSA
Children
Cap limit
on total
HB*
est. no
beds
eligible
1
£285.20
2
Affordable Rent
Mean Net
Rent in
London
Headroom
between
HB and cap
in London
Mean
Affordable
Rent in
London
Headroom
between
HB and cap
in London
2
£114.95
£170.25
£171.64
£113.56
£218.20
2
£114.95
£171.64
3
£151.20
3
£127.68
£103.25
£23.52
£46.56
-£31.18
4
£84.20
3
£127.68
5
£17.20
4
£141.75
6
-£49.80
4
£141.75
1
£243.50
2
£114.95
2
£176.50
2
£114.95
3
£109.50
3
£127.68
4
£42.50
3
£127.68
5
-£24.50
4
£141.75
6
-£91.50
4
£141.75
-£43.48
-£124.55
-£191.55
£128.55
£61.55
-£18.18
-£85.18
-£166.25
-£233.25
£182.38
£182.38
£201.60
£201.60
£171.64
£171.64
£182.38
£182.38
£201.60
£201.60
-£98.18
-£184.40
-£251.40
£71.86
£4.86
-£72.88
-£139.88
-£226.10
-£293.10
Conclusions on Housing
• Housing specific subsidies of all types have been a major benefit, limiting
housing poverty through supply, below market rents and income support.
• In the social sector in particular HAs have provided management support
and security for tenants;
• The growth of the PRS, while generally increasing standards, has left many
households more insecure and paying unaffordable rents – and some
unable to live seperately;
• Welfare changes are leading to greater insecurity and lower incomes – but
poorest have still been protected up to now;
• Major issue around work incentives because high incidence of HB and high
rents means large numbers of working households on partial benefit;
• Those in owner-occupation generally doing better – but many excluded
even though could afford to buy so paying more in the PRS for less;
• Most welfare impacts still to come;
• Underlying all these findings is dysfunctionality in both the welfare system
structure and the housing system particularly with respect to new housing
supply;
• And the intention of reducing government subsidy to housing.
Conclusions on Wellbeing
•
•
•
•
•
•
•
•
•
Very little street homelessness – which has the worst outcomes;
Still very bad among those in temporary accommodation;
Physical housing conditions generally continue to improve;
Insecurity and its impact of mental health and wellbeing worsened by growth of
PRS and changes to social tenancies;
Affordability a major problem for those just above HB and a growing problem for
those on HB. Leaves increasing numbers of households without minimum income–
leading to poorer diet, inadequate heating and serious pressures on mental
health;
But need to be careful not to cry wolf. In work benefits being cut but incomes
rising; cuts are as yet marginal in social sector; elderly and physically heavily
disabled protected; outright ownership growing and those in owner-occupation
benefit from low interest rates;
Single parents and large families at increasing risk from welfare cap;
But those where housing affordability affects wellbeing most are young singles
tenure – and those who are most fearful of change – including in particular the
disabled with lesser disabilities but little access to employment;
Principles of housing in relation to welfare set in place in 1947 beginning to be
eroded.