“One in three low-earning renters in Britain have had to borrow money to cover their rent”
On 11 May 2017, Shelter and YouGov reported figures that painted an alarming picture of renters in Britain burdened and trapped in the private rented sector. A picture where people are “being driven into debt to keep on top of their rent, with over half a million low-earning renters borrowing from credit cards, overdrafts or friends and family in the last year alone.”
Although we are sadly much too familiar with the general narrative, this report highlights the truly harsh reality for individuals and families on low incomes in the private rented sector. Particularly shocking are the conclusions that 70% of low-earning private renters are either struggling with or falling behind on rent whilst 800,000 hard-pressed private renters are unable to save even £10 a month. “I don’t know when we’ll ever break this cycle of rent and debt,” says a case study participant.
So how can the Government begin to salvage this situation and help individuals escape the vicious circle of rising rents together with rising debts?
Living rent homes
Shelter for one calls for “a new generation of living rent homes for ordinary working families”. But what are ‘living rent homes’ and can they offer a solution?
In brief, living rent homes are homes at rents that are linked to local earnings in order to be genuinely affordable. Shelter estimate that a household on a lower income should pay around a third of their income on rent. In this way, living rent homes will “allow people to live a decent life, not just scrape by.” Moreover, after a number of years the tenant would have the option to buy the house if they were able to. Unlike social housing they would be allocated solely to households in work but on lower pay i.e. those unable to afford shared ownership but similarly unable to get social housing.
An example: London living rent
Despite recent reports that London rents are falling for the first time for six years, it is a truth universally acknowledged that rents in London are excessive (at best) and extortionate (at worst). Even Londoners on an average income will be spending around half their wages purely on rent. As part of the solution to tackle this situation, London Mayor Sadiq Khan set out his ‘London living rent’ initiative (LLR) in 2016 and on 3 May this year met tenants at the first homes delivered under this scheme.
In general LLR is described as a “new intermediate affordable housing product targeted at middle-income households in London’s private rented sector who are looking to build savings for future shared ownership or outright purchase.” Eligibility is restricted to households renting with a maximum household income of £60,000 and not able to purchase a home in the local area. LLR is expected to actively support tenants into home ownership within 10 years. In terms of rent, although this is to vary according to where the property is in London, this will average out at £970 per month for a two-bedroom LLR home.
The tenants met by the Mayor this month began moving into 76 homes made available for LLR in Beckenham. Rents for these properties are set at £965 per month for one-bed properties and £1,072 for two-bed properties. On one hand many would agree that these rents would still be steep for many Londoners. On the other hand it is reported that they are up to 30% cheaper than local market rents. At the very least, as Shelter noted in 2016, the Mayor’s LLR initiative could be summed up as a positive start of “recognising needs of hard pressed renters”.
Moving forwards, the Mayor has announced a partnership with Hyde Housing Association to develop up to 5,000 homes over the next 5 years and a plan to make 60% of them ‘genuinely affordable’ to buy and rent. Two thirds of the proposed homes are to be aimed at first-time buyers and will include homes for LLR and shared ownership.
Living rent homes – a way out?
‘Affordable housing’ is a term that is regularly bounced around and ‘living rent homes’ as part of that umbrella is certainly one way the Government could help those identified as trapped in the vicious circle of the private rented sector. Though the LLR scheme is a step in the right direction, it still only caters for middle-income households. We should definitely push for more such schemes but also those that specifically cater to the low earning income renters. As Anne Baxendale at Shelter remarked: “It just isn’t right that so many hard-working private renters are having to take on desperate or dangerous debts just to keep a roof over their heads. No family should have to choose between relying on their credit card to keep up with the rent or moving miles away from their jobs and schools to find a home they can actually afford.”