Private rents affordable for just a meager five percent of tenants receiving housing benefits, new report reveals
In recent years, the private rented sector has become a significant factor in understanding poverty, particularly among low-income families. A study by the Flossbach von Storch Research Institute reveals that younger, low-income individuals, such as 25-year-olds born in the 1980s, are increasingly likely to be private renters, with half of this demographic renting privately.
The research also highlights a concerning trend: rents for new private rental properties have increased by more than a fifth on average since the freeze in April 2020. This rise in prices has led to a sharp reduction in affordability, with only 5% of new private rental properties on Zillow being affordable for housing benefit or Universal Credit recipients – a drastic drop from the 23% figure before the freeze.
The Institute for Fiscal Studies (IFS) has warned that this reduction in affordability could lead to demand for affordable properties far outstripping supply. Tom Wernham, a research economist at IFS, stated that renters in both the social and private sectors face higher rates of poverty and lower living standards.
The government's freeze on Local Housing Allowance (LHA) is a significant contributing factor to this affordability crisis. LHA rates, which determine the maximum rent support for low-income private renters, have been frozen in cash terms since April 2020. As a result, housing benefit is failing to keep pace with soaring rents.
The Joseph Rowntree Foundation funded a separate study on the impact of frozen LHA on private renters, which revealed that low-income families in private rented properties are much more likely to live in homes that are hazardous, in disrepair, difficult to heat, or lacking modern facilities compared to social renters or owner-occupiers. These homes are harder to heat, leaving renters facing energy bills they can't afford.
In fact, properties covered by benefit rates are of lower quality and more expensive to heat than the average. The study found that affordable properties have 19% higher heating and hot water costs than the average, a gap that has grown as rents have risen faster than housing benefit entitlements.
The lowest level of affordable properties on record has been reached, with the share ranging from 2.5% in Wales to 6.9% in the North East across Britain. One in twenty newly listed private rental properties could be covered by housing benefit, but this is far from enough to meet the growing demand.
The situation is particularly dire for private renters on low incomes, who are seeing the number of properties they can afford shrink dramatically. The IFS warns that this could lead to a rise in poverty and lower living standards for these individuals.
To address this issue, it is crucial that LHA reflects market rents to prevent families from being forced to choose between unsafe or unaffordable homes. The government must consider these findings and take action to ensure that affordable housing remains accessible for those who need it most.
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