While Theresa May was spluttering her way through her conference speech, dodging her P45 and falling letters, the government snuck out a £3.35bn hit on some of England’s poorest households. The relevant part of the announcement was one paragraph long. But it will end up affecting millions of people, as one hypothetical family demonstrates.
Under the proposal set out today, increases to social housing rents will be limited to the Consumer Price Index (CPI) plus 1% for five years from 2020. This will give social tenants, councils and housing associations the security and certainty they need.
The National Housing Federation is lobbying for flexibility for associations to set their own rents.
And as Inside Housing noted:
Housing associations have been lobbying for an inflation-linked rent settlement since communities secretary Sajid Javid promised certainty at the National Housing Federation (NHF) conference last month.
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And it seems housing associations got their wish.
With CPI inflation forecast [xls 3.15] to be 2% in quarter two of 2020, this means social rents will go up by 3%. Currently, the social rent ‘roll’ (the total value of all social rents per year, as calculated from published figures by The Canary) is £22.19bn. By 2020, this will reduce to £21.01bn, assuming the housing stock remains roughly the same. But with a 3% rise, it will then leap by £630m in 2020/21 alone.
Total rents will end up being £24.36bn in 2025; meaning this will hit people in social housing with a £3.35bn increase – an extra £143 per household per year.
And while £143 may not sound like a lot, the figure needs to be viewed in conjunction with other factors.
A typical family?
63% of people [pdf p1] in social housing get housing benefit. So, as an example, take a family of two adults and two children under 14 living in social housing in Slough. Both adults are in the Work Related Activity Group (WRAG) of Employment and Support Allowance (ESA), as one lives with fibromyalgia and the other with severe depression.
Currently, they get:
- £7,602.40 a year in income based ESA (£73.10 each per week, after the government reduced it by £30 per week).
- Their social rent of £123.44 per week, Slough’s average [xls, sheet one, row 50, column AA], covered by housing benefit – so £6,418.88 per year.
- £1,788.80 child benefit a year.
- £5,560 child tax credit (child element) and £545 family element per year.
This means the family’s total benefits are £21,915.08 a year. But the family is subject to the benefit cap of £20,000, so had their housing benefit reduced by £1,915.08 in 2015/16. This means they have an income before housing costs of £15,496.20. The family is classed as being £20 a week away from living in absolute poverty, by the government’s own measure (60% of the 2010/11 median weekly income [pdf], adjusted for inflation). And this family would also be in the 10% poorest in the UK, using this interactive:
Left to rot
By 2020, their ESA and child benefit will not have increased, as these have been frozen since 2016. But their weekly rent will have dropped in line with the yearly 1% reductions to £118.50. Although when the government’s new rent rules come in, this will increase to £122.06. So in theory, this family will still have an income before housing costs of £15,496.20.
But none of this accounts for inflation, which by 2020 will leave this family around £3,000 worse off in real terms (adjusted for inflation) than they are now. Because by that time, median income is forecast [pdf p29] to be £518 a week while their ‘income’ will not have changed. So this family will then have been pushed into absolute poverty.
And with the increase in social rent, this will only get worse. Because by 2025, if ESA and child tax credits have not increased, this family will have £179 less cash a year to live on than they did a decade earlier.
May: cutting families to the bone
This ‘hypothetical’ family cannot afford a rise in social rents in 2020. And neither can thousands of real-life families across England, either. Government policies have already contributed to:
- More than 14 million people in the UK now living in relative poverty.
- The number of children living in poverty rising to four million.
- 66% of children who live in poverty coming from working households.
- Nearly half of all poverty in the UK being directly linked [pdf p1] to disability.
- The number of three-day food packages sent out by the Trussell Trust rising from 40,898 to 1,182,954 by 2016-17. That’s an increase of 2,792%.
A rise in social rents could very well be the last straw for thousands of families.
The Canary contacted the government for a response, but none was received at the time of publication.
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