1. Governance
April 24, 2015

Five ways low wage-earners are being banished from central London

By John Perry

London is getting less and less like the rest of the country. Elsewhere houses prices have struggled to reach 2007 levels, but in the capital they’ve already grown by more than a fifth. The price of a one-bedroom home in London would secure a three- or even four-bedroom house almost anywhere else. Because of its housing costs, London now has the highest levels of “absolute” poverty in the UK.

By accident or design, welfare and housing policies combined make it harder – not easier – for those earning low wages to live in London. Here are five ways in which low earners are being slowly banished; they’re based on the findings from the UK Housing Review 2015.

1. Welfare reform means people on low incomes increasingly can’t afford to rent

London saw the biggest increases in private rents of any region last year – but numbers on benefits (local housing allowances) in inner London fell by almost ten per cent, after caps were imposed on the maximum rents eligible at the end of 2011. The sharpest falls – of 30-35 per cent – occurred in Kensington & Chelsea and in Westminster. Yet, nationally, numbers continued to rise (albeit more slowly than before).

The changes are making it much more difficult for low-income households to get or keep private tenancies in high-value areas. Young people are in an even worse position, because under-35s now only qualify for a “shared accommodation rate”: numbers of 25-34 year-olds claiming have been cut by 18 per cent, and of under-25s by two-fifths, in London in less than three years.

Although only affecting tenants who lose their job, the overall benefit cap has also hit London hardest: of the twenty most affected areas, 18 were London boroughs. For people who are in and out of work, the benefit cap can mean they become homeless. Add in the bedroom tax (that applies only to social tenancies), hitting over 48,000 Londoners with cuts of up to £24 per week, and it’s pretty clear that welfare reform isn’t intended to help people on low incomes rent a flat in central London.

2. Homeless families get a tougher deal in London

London now stands out as the only part of the UK where homelessness is still growing – by 80 per cent in the last four years. Why is it bucking the trend?

One of the main factors is people get pushed out of private tenancies – they made up less than 1,000 cases four years ago, but last year accounted for 5,960 homelessness cases in London. No one knows exactly why evictions now account for 38 per cent of London’s homelessness rate, but it’s very likely to be landlords wanting to put up rents or to evict tenants who need housing benefit.

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Once you become homeless, chances are you won’t get permanently rehoused, and your temporary accommodation might well be outside London. Use of temporary accommodation has risen by a quarter since its low point in 2010, and this is entirely because of increased use of temporary lets in London, which are now three-quarters of the national total. Use of “out of area” accommodation by London boroughs has gone up by 29 per cent in the last year; London accounts for nearly all these cases of people being sent to live elsewhere.

3. Council housing is being sold off

Despite these desperate needs, council housing is being sold off: twice as many homes were sold by London boroughs in 2013-14 as in the year before.

Most sales were the result of right to buy, with discounts in London having now gone up to over £100,000. Overall, London has 15,000 fewer council homes now than it did four years ago. Ironically, in inner London well over one-third of homes sold under right to buy are now rented out – rising to 40 per cent in Kensington & Chelsea and 50 per cent in Tower Hamlets.

4. Social lettings are going down

Not surprisingly, losing stock means there are fewer lettings. Overall new lettings by councils and housing associations in London are falling – from 24,700 in 2011-12 to 21,400 in 2013-14. Nationally there has been a 3 per cent fall in new lettings in the last two years, but London has seen the fastest fall (14 per cent).

It is also now more difficult to get onto a waiting list, and if you are in temporary accommodation you may never qualify for a permanent home. Since the Localism Act 2011 allowed councils to impose new rules to exclude many applicants from their waiting lists, numbers have fallen by one third across London. Several boroughs have slashed their lists by more than half.  

5. Social homes are more expensive

Finally, where lettings are available, they are often at higher “Affordable” rents (AR). London lettings by housing associations at AR rents have doubled in a year, to over 10,000. Not surprisingly, London rents for this new type of letting are the highest in the country. At £162 per week, they are £60 higher than average London council house rents.

All these five pressures are due to get worse. For example, while London councils hope to build over 10,000 new homes in the next decade, they expect to lose more than 16,000 in right to buy sales. For housing associations, building under the GLA’s Affordable Homes Programme from April will mean higher rents (65 per cent of market levels on average, but often up to 80 per cent in particular schemes).

It also means they will have to convert more of their existing stock to the higher rent levels when tenants leave – or, indeed, sell it off completely to subsidise their new build programmes. London, and especially inner London, is due to get even more unaffordable for those on low incomes.

John Perry is a policy advisor with the Chartered Institute of Housing

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