Housing affordability since 1979: Determinants and solutions
Rents in the private and social rented sectors are close to their highest for decades as a share of tenants’ incomes. This report examines why, and the policy options that could help tenants stay afloat.
What you need to know
- Reversing the decline in housing subsidies is key to enhancing the affordability of housing for renters. The value of housing subsidies has fallen from 16.5% of total day-to-day cost of housing services in the national accounts in 1979 to 11.5% in 2019–20. If housing subsidies had remained at their 1979 levels as a share of total housing costs, they would have been worth £45 billion in 2019–20 rather than their actual level of £31 billion.
- The erosion of subsidies explains the decline in housing affordability for renters over the past 40 years. This underlines the importance of subsidies if housing affordability is to be improved.
- The appropriate mix of housing subsidies should be determined by differentiating between the needs of different household types. Social housing is the most appropriate solution for low-income families with children, pensioners and those with a disability. An additional 700,000 social properties would allow the level of social renting among lower-income families with children to return to its 1979 level and the share of lower-income working-age disabled people living in private rented accommodation to be reduced below 10%.
- Housing Benefit should remain a complementary policy tool to help households who are temporarily poor, or for whom labour mobility and choice are the most important considerations. To improve the experience of renting in the private sector, policy-makers should end the Local Housing Allowance freeze, re-link rates to the 30th percentile of local rents and introduce the reforms to the private rented sector outlined in the recent ‘fairer private rented sector’ White Paper.