In the second instalment of our 2020 look at housing insecurity, City Monitor has created a Housing Security Index for urban local authorities in England and Wales.
An analysis of economic and domicile-related variables from 29 large urban areas has identified localities where security is especially precarious and may be more vulnerable to the financial instability brought about by Covid-19.
Throughout this article, we will refer to these urban areas as “cities”. It should be noted, however, that not all of these places have official city status. In the UK, this is something of a constitutional quirk that has no direct bearing on their size or importance. In terms of methodology, we have used local authority boundaries for all “cities” except London, as official data in the UK is generally collected at the local-authority level. For London, we have used regional data.
We looked at 12 factors, including affordability, social-housing stock, eviction and foreclosure claims, rates of homelessness, unemployment, service occupations employment and other labour force measures to identify the most and least housing-secure cities in England and Wales.
We endeavoured to include Scotland and Northern Ireland; however, due to data collection and reporting methods, information was not consistent enough across local authorities to make meaningful comparisons.
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The index shows a broad range of UK cities that are at higher risk for housing insecurity, driven by varying factors in different parts of the country.
London takes the top spot on our index mainly because its rental and homeownership prices are already sky-high.
Cities in the West Midlands feature prominently too. In the case of Wolverhampton, this is largely due to sluggish economic growth. In the case of Birmingham, the key factor is high levels of unemployment. And in Coventry, the story is high rates of foreclosure and eviction claims.
Manchester’s position at fourth least housing-secure might come as a surprise given its recent economic growth, but its city-centre property boom and rapid population growth have actually put a strain on domicile costs for those nearer the bottom of the income ladder. Residents in Manchester struggle more than those in most UK cities to afford rents and mortgages, putting a greater demand on homelessness services. Additionally, unemployment levels in Manchester are among the highest of the locales we looked at for this index.
Throughout this article, we discuss the least housing-secure UK cities and compare them with the most secure, according to our index. Those labelled most secure should not be seen as immune to the effects of insecurity. Those on our most housing-secure list have lower rates of eviction claims and better affordability; however, some also have higher rates of poverty and relatively poor economic prospects. While these cities certainly will experience struggles related to Covid-19, overloaded dwelling services are less likely to be among them.
Social-housing and local-authority funding
The UK has seen great change in its residential market since WWII. Massive construction of social housing after the war meant that the majority of residents who did not own their homes lived in such domiciles. But after the introduction in 1980 of Right to Buy, a programme that allowed those tenants to buy their government-provided homes for reduced prices, the UK’s social-housing stock was decimated.
Social-housing numbers stabilised in the mid-00s, partly due to a tightening of Right to Buy that made it harder and less profitable to purchase such dwellings. But central-government funding cuts to local authorities following the Great Recession and restrictions on the amount of council taxes that can be levied have led to a situation where local authorities cannot afford to build new social housing for their ever-growing populations.
Today, most social housing that does still exist is owned and managed by not-for-profit associations, leaving local authorities to focus their reduced resources on statutory requirements such as child welfare and homelessness.
“All these other things, like women’s refuges, homeless hostels, drug centres and so on, these have all been closed down because the amount of money has been completely slashed, and so it won’t be long before some have no central-government grant,” says Peter Kemp, a professor of public policy at Oxford’s Blavatnik School of Government.
Manchester has one of the higher percentages of social housing among the cities we examined for this index, but it saw an 8% decline in stock between 2012 and 2019. The city has made some progress on shortening its social-housing wait list since 2012, but there are still 14,608 residents on it.
With the shortage of social housing across the UK, low-income residents who cannot get public dwellings and cannot afford private-rental rates are given a local-housing allowance (LHA) to offset their rent.
Established in 2008, the LHA was originally set at the median private-rental rate. By 2011, that rate would be cut to the 30th percentile, meaning residents requiring assistance would be able to afford only a third of all available rental properties. In 2016, the rate was frozen, and for the next four years, as rents went up, the LHA rate stayed the same, forcing many low-income renters to use funds meant for heating, food and clothing to cover additional rent expenses.
In March 2020, the LHA rate was increased to match the 30th percentile as a Covid relief measure.
A compounding factor to residential affordability is housing quality. Renters using LHA are pushed to find units that are in the lower 30% of domiciles (or less), which often means they are not as well maintained.
“What looks affordable on the surface, whenever you dig down and you look at those other variables, it’s actually not affordable,” says Martina McAuley, research and evaluation officer at Housing Rights, an organisation that tackles issues of homelessness and housing in Northern Ireland.
McAuley and her colleague Kerry Logan, a welfare reform policy officer for the organisation, say they receive calls from residents who can’t afford to heat their rentals because poor insulation and old construction bleed what heat is available. Residential fitness standards in Northern Ireland are so low that they do not have legal recourse to get units deemed unfit.
Logan points to the housing health and safety rating system (HHSRS) in England and Wales. She says that while it is not foolproof, it has value and there are groups that are actively working to improve it. In Northern Ireland, the government hasn’t even established such a rating system.
Northern Ireland also doesn’t have private-landlord registration like other parts of the UK, so it’s harder to hold such landlords to account when they aren’t keeping up their properties.
Rent and housing affordability
The most and least housing-secure cities on our index experience vastly different rental situations. Residents in the most secure pay, on average, 29% of their income to rent a two-bedroom apartment as compared with the least secure, who pay an average of 37%.
While London is, in many ways, the richest city on our index – its residents earn higher incomes and generate more GDP than nearly every other place we analysed – that does not stop it from being the least affordable.
London is by far the least affordable city to rent in and the most housing-insecure on our England and Wales index. London residents spend, on average, 56% of their monthly income on rent. City Monitor’s 2020 US Housing Security Index found Los Angeles to be the least affordable US metro area in terms of rent and the least housing-secure metro of those analysed for the US index. Residents in Los Angeles spend, on average, 46% of monthly income on rent.
High spending on residences often deprives residents of the ability to generate personal savings and makes their ability to remain in their home uniquely vulnerable if their economic circumstances change.
In terms of homeownership costs, the most and least housing-secure cities on our England and Wales index have relatively similar house price-to-income ratios. The most secure have home sale prices that are, on average, 5.5 times the median local annual income, while the least secure have prices, on average, 6.6 times the median income.
In the least housing-secure cities, those ratios are getting worse over time.
Cities with the worst residential security saw an average increase in home price-to-income ratio of 19% between 2005 and 2019, compared with those with the best housing security, which saw, on average, an increase of only 4%.
Unsurprisingly, London saw the worst increase in this metric between 2005 and 2019. In 2005, London homeowners bought houses that were, on average, 8.13 times their annual incomes. By 2019, that ratio would rise to 12.77, a 57% increase.
Foreclosures
According to our index, both the ten most housing-secure and the ten least housing-secure cities in England and Wales exhibited the same downward mortgage foreclosure claim rate trends between 2013 and 2018. In 2013, the average foreclosure claims rate per 10,000 households was about 15 for both the most and the least secure locales. By 2018, that figure would drop by 73% to four per 10,000 households.
England and Wales may be seeing fewer home foreclosures since 2013, but the advocacy group Housing Rights expressed concerns about the foreclosure numbers it is seeing in Northern Ireland.
McAuley says that right before Covid, the group was seeing an uptick in foreclosure claims in Northern Ireland, suggesting that even without the economic instability brought on by the virus, homeowners were struggling to pay their housing costs.
Although there has been no official eviction or foreclosure ban in Northern Ireland, courts have stopped processing these types of claims, effectively putting a temporary halt to repossessions.
McAuley is worried about what will happen when the courts start processing claims again. Covid-19 has no doubt made a situation that was already bad worse.
Evictions and homelessness
Residents in Walsall, the 11th least housing-secure city on our index, spend about 28% of their incomes on rent. That’s slightly less than the average for cities that we ranked as the most secure. However, Walsall residents experience the third highest rate of eviction claims of any of the places we examined for this index. Between 2013 and 2018, Walsall’s eviction claim rate has risen 56%, from 35 per 10,000 households to 55.
Leicester and Milton Keynes – second and seventh worst, respectively, on our England and Wales Housing Security Index – also have high rates of eviction claims, with notable increases in claim rates between 2013 and 2018. However, there are two significant differences between these cities and Walsall: residents in Leicester and Milton Keynes pay higher percentages of their incomes on rent and are at higher risk of homelessness.
Leicester’s 2018 eviction claim rate was 45 per 10,000 households, up 36% since 2013. Leicester residents pay 36% of their income on rent on average and have house prices 7.5 times average incomes. Since 2012, they’ve lost 12% of their social housing. They also have the second worst homelessness threat of all the cities we looked at for this index. On average, 33 households per 10,000 were at risk of homelessness within two months for the period of January–March 2020.
Milton Keynes had the highest 2018 eviction claim rate at 66 per 10,000 households, up 31% since 2013. Its residents pay 37% of their income on rent on average and have house prices 8.9 times average incomes. Since 2012, Milton Keynes has increased its social-housing stock by 5%; however, its residents also have the fourth worst homelessness threat of all the cities we looked at for this index. On average, 28 households per 10,000 were at risk of homelessness within two months for the period of January–March 2020.
There are two ways to evict a tenant in England, Wales and Northern Ireland. First is a Section 8 order, which means that the renter is either behind on payments or guilty of antisocial behaviour. Second is a Section 21 claim, so-called no-fault evictions, for which the landlord need not give a reason, only two months’ notice of eviction. Since Covid-19, the notice period has been extended to six months. Scotland banned no-fault evictions in 2017.
According to data analysis from Generation Rent, a renter advocacy group, there is a relationship between no-fault evictions and homelessness. A side-by-side comparison of Section 21 eviction orders and homelessness figures over time reveals a tight correlation between the two variables.
Cities with the worst residential security on our index had higher rates of homelessness threat than those with the most secure housing. The most insecure cities had, on average, 23 households per 10,000 at risk of homelessness within two months for the period of January–March 2020. The most secure had an average of 12 households per 10,000 at risk of homelessness within two months for the same period.
In 2019, Communities and Local Government Secretary James Brokenshire said England would end no-fault evictions by overhauling Section 21 and restructuring Section 8. Landlords would be still be able to evict tenants for rent arrears or antisocial behaviour, or if they were intending to sell or move back into their house, but they would no longer be able to evict for no reason with only two months’ notice.
The ban on no-fault evictions has yet to come into effect.
Those in opposition to the ban say that without Section 21, landlords may choose higher-income applicants or those who have fewer pets or children, to protect their investment.
Those in favour of the Section 21 ban point to Scotland and Germany as countries that did away with no-fault evictions and continue to have thriving private-rental markets.
What is needed
“If this pandemic is to teach the government anything about solving the housing crisis, it’s that more people urgently need safe homes they can afford to live in,” says Polly Neate, chief executive of Shelter, a UK housing and homelessness charity.
Shelter is calling on the UK’s central government to set up a social-housing rescue package and invest £12bn ($15.77bn) over the next two years to fund up to 50,000 new social homes.
Kemp also points to new domicile construction, though not specifically social housing, as a starting point to addressing residential insecurity.
“Local authorities could, if there was the local will, actually allow more developers to build. That’s not an overnight solution,” Kemp says. “If you’ve got a problem that’s built up over four decades, it’s going to take many decades to solve it. But you’ve got to start somewhere. But there’s a lot of opposition. It’s a Nimby problem.”
In addition to strict building codes such as green belt restrictions, Kemp notes that residents in some cities fight construction to prevent change in their communities.
Some progress has been made, however. For example, the Oxford City Council recently required the University of Oxford to start providing housing for its students. Before that, individual families were having trouble competing with students for dwellings. For instance, a single low-income family would likely not be able to pay as much for a three-bedroom house as three to four college students. And with 27% of the city’s population made up of students, the problem was not isolated. Oxford was not included in this index due to its size.
Northern Ireland is contending with a different sort of issue: a backlog of government priorities after its government fell apart three years ago.
“There’s so many competing priorities at the moment in terms of all the Covid stuff going on, all of the Brexit stuff going on, that we’re sort of in the midst of, as well,” says Logan. She explains that the backlog, together with the fact that the current government mandate has only 18 months left, has left Northern Ireland’s cities and towns with a long housing policy wish list but little hope that much of it will be pushed through within the next few years.
At the same time, as McAuley points out, the private-rental sector has been growing rapidly over the past 40 years. “The longer we leave it, the bigger the sector gets, and it’s not getting any better for people,” she says.
