A National Housing Federation (NHF) report published yesterday revealed that the cost of privately renting a home has risen by 37% in the past five years, and is set to rise a further 35% over the next six years.
With wages effectively stagnant this means that privately rented accommodation is becoming increasingly unaffordable, not just for unemployed people but also for those in work. Since 2009 417,830 more working people are relying on housing benefit to pay their rent, this represents an 86% increase. The vast increases in rent predicted by the NHF mean that we can only expect this number to rise further.
At the same time as rents are soaring the government has cut housing benefit. The measures introduced so far, in particular the using the 30th percentile to set the maximum allowable rent and the cap, have already reduced the proportion of private lettings which are affordable to housing benefit claimants. Prior to their implementation the government claimed that these measures would help to reduce rents but these figures demonstrate that the opposite is true.
One of the changes to Housing Benefit that hasn’t yet been introduced is the move to uprating by CPI. At present the rates permitted for Housing Benefit are set by reference to actual rents, which are collected by the Valuation Office Agency. From 2013 however the current rates will simply be uprated by CPI, the measure of inflation that excludes housing costs from the calculation.
This means that from 2013 Housing Benefit will rise annually without any link to the actual increase in rent over that period. With rents predicted to increase faster than general prices the proportion of rental properties that benefit claimants can afford will decrease as time passes. With each passing year the relationship between housing benefit and rents will become more and more distant. Such an effect will be progressive and cumulative.
For example a 2010 study by the Cambridge Center for Housing & Planning Research based on inner Greater Manchester found that by 2018, only the bottom 5% of 2 bedroom properties might be available at or below housing benefit rates.
Although the move to CPI may seem like a minor change over time it will serve to undermine the central policy objective of housing benefit. As benefit levels fail to keep pace with soaring rents the supply of houses affordable to benefit claimants will shrink and this means that that housing benefit will no longer be able to ensure that accommodation is available to all households regardless of their income.
Fundamentally the only solution to the problem of soaring rents is a massive increase in the supply of affordable housing and for this to be achieved the government must take decisive action now.