High Cost of Housing

High Cost of Housing

High house prices may get more newspaper headlines but the high cost of housing (rents) is the more pressing issue, especially for those struggling or unable to buy. As Figure 13 shows, there is a clear difference in average housing costs across tenures. For most owner-occupiers, including recent first-time buyers, the cost of owning their own home is well within affordable levels despite high house prices (see section 1.1.3). However, as the chart shows, households in the rented sectors spend a much larger proportion of their income on housing, even once housing benefit is factored in.

Figure 13 – Housing Costs as % of Household Income Including Housing Benefit, England

Source: English Housing Survey

The high cost of housing for renters creates multiple problems and is directly linked to other housing issues, including over-crowding, tenure insecurity, and poor-quality housing. It also accentuates the issues with high house prices by constraining renters’ ability to save for a deposit and become home-owners.

Tackling the high cost of housing should be a priority but the lack of data makes it difficult to assess how much of a problem it is and where it is located, particularly in the private rented sector. As Section 1.1.5 showed, it is possible to make simple assessments of rental affordability across local authority at fixed points in time by comparing rents to average earnings. However, this is too blunt to accurately assess how issues like Local Housing Allowance and changes to housing benefit impact on different household types.

Unfortunately, it is nearly impossible to accurately track the change in rental costs over time below regional level. Tracking changes in rental affordability over time is important because a high cost of housing does not necessarily indicate a lack of supply. A lack of supply would normally be associated with a rising cost of housing. However, as Figure 9 showed, rents across England have risen in-line with earnings in recent years. Combined with the above chart it appears national housing costs are high but have been stable in recent years.

The stability of housing costs at a national level may possibly suggest there is no national lack of supply. However, the lack of local data tracking rents and housing costs over time makes it more difficult to definitively assess whether there is or isn’t a lack of supply in local housing markets. For example, as Figure 14 shows, the ONS private rent index suggests rental growth has been relatively low across most English regions over the last decade with the exception of London, at least until 2017.

Figure 14 – Annual Change in Private Rents

Source: ONS Private Rent Index