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John Bibby
 
John is a Policy Officer at Shelter.

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By John Bibby

Lies, damn lies and rent statistics

Here’s a quick quiz: how much are rents going up by in England?

A)   7.5%
B)   1.4%
C)   4.6%
D)   1%
E)   They’re not rising, they’re falling

It’s a tough one, but if you answered any of A, B, C, D or E then congratulations! You can make a case for being right. All five are estimates of the increasing cost of renting that have been published in the last month.

But there’s a problem, surely: they can’t all be right. So why the wide disparity between the different results?

Part of the answer simply lies in which data the measures are based on.

The first three measures are all made by private property companies based on their own business data (A is from tenant referencing and insurance company HomeLet, B from estate agent group LSL and C from estate agent group Countrywide). All are thus based on different datasets and the differences between their results likely accounted for by differences in the geographic distribution or market focus of their clients.

In a sense this means they can also all be right: the amount that HomeLet’s clients are charging in rents can go up by 7.5% in the same year that LSL and Countrywide’s increase more slowly. They just don’t all accurately reflect the rate of change in market rent for the whole country. And the likelihood is that none of them reliably, consistently and accurately do it.

Which brings us to D and E, the government’s stats: from the ONS’s Index of Private Housing Rental Prices (referred to as the ONS stats throughout the rest of this post) and DCLG’s English Housing Survey respectively. These are both also based on different datasets – the ONS stats are based on a matched sample from Valuation Office Agency data and the English Housing Survey on its own survey sample of 2,500 renters.

But the differences don’t stop there. It is not just that the government stats are based on a different – presumably more balanced – sample and are therefore more right than the private estimates. Both sets of government stats also aim to measure something different from the private property companies’.

The private company stats purport to measure changes in market rents: the amount of rent that landlords charge new tenants (whether advertised or achieved). By contrast, the ONS stats and English Housing Survey try to measure uplift in the amount that all renters actually pay, including both new tenants and those already in rented accommodation.

To illustrate the difference, let’s consider a comparison. The private companies’ rent indexes are similar to familiar measures of house price inflation (such as those published by Nationwide or Halifax every month). Just as the house price figures measure how much prices of houses sold in the last month have gone up since this time last year, the rent figures measure how much rents have gone up for new tenancies last month compared to a year ago. In contrast, the government stats are more like the owner-occupier housing elements of RPI inflation (interest rate payments and property depreciation) as they mix in the costs incurred by people who have just bought a house with those who have been in their home for years or even paid off their mortgage.

It is a critical difference, because those paying the lowest housing costs and facing the smallest increases – both for private renters and owner occupiers – are those who have been in their homes for the longest length of time (as demonstrated in the table from the English Housing Survey below).

It’s reasonable to expect, therefore, that increases in both the ONS and English Housing Survey stats will be smaller (and less volatile) than actual increases in market rents.

This is not to say that the government statistics are not useful – and it’s certainly an improvement on a few years ago when the ONS published no rent statistics at all. Policymakers should be able to refer to a measure of the cost of renting for all renters, to inform decisions affecting the whole of the private rented sector, rather than just new renters.

But they also need clear information on how rents that are available on the market are changing – and this is the missing piece of the jigsaw.

When we talk about increases in house prices we typically think in terms of the amount that I would expect to pay if I bought a home today. We don’t include in the equation historic prices paid by people who bought ten or twenty years ago. Because of this cultural association, there is a danger that when the ONS stat is used in policy discussions to talk about increases in rent, what it actually measures is misunderstood.

And it’s important to know what you’re talking about when you’re discussing rent measures – not least as politicians have been known to trade blows about whether rents are actually rising or not.

As the ONS stat will under-report recent changes in rents, the danger is that policymakers won’t be able to spot spikes in market rents. After all, why would you worry when the official rent statistics suggest rent increases are so low?

What this misses is that, unlike owner-occupiers, private renters move frequently. Each year, a quarter of private renters will move and start paying a new market rent – and so market rents have a big impact on their housing costs.

This is why Shelter recommends that the government commission ONS to start tracking market rents. We fed this into ONS’s consultation on the Index of Private Housing Rental Prices earlier this year and they are now considering this.

Of course, even with entirely robust and comprehensive statistics, renters will still be subject to the possibility of sky-high market rents, unless we get a better deal for renters. But accurate and well-understood statistics can help to make the case for change.


Pete Jefferys
 
I’m a Policy Officer at Shelter and interested in how we can get housing up the political agenda, secure a better deal for private renters and get affordable homes built. Outside of policy, I love exploring new parts of London, sport and going back home to Devon.

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By Pete Jefferys

Clipped wings generation

One in four working adults between the ages of 20 and 34 is now living with their parents (read the research here).

While some commentators might jump to lazy conclusions about young people just wanting home comforts, new research published by Shelter today shows that the dominant reason so many young adults with independent incomes are not flying the nest is the cost of housing.

In a survey we found that by far the biggest reason given for living at home was the lack of affordable housing. Two thirds said that housing affordability was a factor in their living arrangements while nearly half (48%) said the cost of housing was the main factor. Three quarters of those surveyed did not think they had a choice in their living arrangements and half are worried that living in their childhood bedroom is holding them back from an independent life.

Even when you work hard, an independent home of your own is slipping out of reach for more and more young adults.

However, there’s a discrepancy to explain. There is not a strong correlation between house prices or rents and the concentration of young adults living at home. In London, 21% are living with parents compared to 28% in the West Midlands. The map of the country shows that the “hotspots” are all over England and that cities have lower proportions living with their parents.


Our research explores several options which could explain this, such as concentrations of high or low paid work, deprivation and median wages. With the caveat that more research is needed, our early analysis suggests that there are two main reasons:

  • The biggest correlate we found is simply the proportion of 45-64 year olds in the local population. In other words, a larger proportion of young adults live with their parents where there is the opportunity to do so (and escape high housing costs).
  • However, when asking young adults themselves we found that high housing costs were the biggest reason that they gave.

It’s a combination. Young adults are priced out and so are living where their parents live and commuting to their work. That’s why the proportion of young adults living at home in central London is low – the proportion of parents who live there is low!

So what are the implications of so many young working adults being effectively trapped at their parents’ home?

At a basic level, I would argue three:

  • Growing frustration among otherwise successful working young adults who have little choice but to live at home or face unaffordable rents. They will want to know why their wings are being clipped and will increasingly demand answers to let them live independently and affordably within commuting distance of their work.
  • Growing anger from more and more parents who are not seeing their children gain the independence they once did. Some will target their blame at their children or culture or other factors, but I think that as a growing share of the population finds themselves in this position, the anger of parents will focus more on politicians and their failure to make homes affordable.
  • A growing disconnect in public discourse between housing and other social issues. We are likely to see the number of young working adults living with their parents increase, even in times of economic prosperity and growth. This is what happened through the growth years of the late 90s’ and early 2000s, but this time an even bigger proportion of young adults will be affected. Housing is different and people will want to know why.

I would argue that there’s a big mood shift in housing, which is largely driven by people’s day to day experience of their children, their friends’ children or their grandchildren having their wings clipped. Housing is now a top five issue of concern for voters, higher than it has been for years. We’re also seeing a strong majority across England oppose to rising house prices and a striking reversal in people’s attitudes to the prospect of new homes being built near them. The public wants major action on housing: the prize will be for whichever political party can credibly promise it. 


Zorana Halpin
 
Zorana Halpin is a Policy Officer at Shelter

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By Zorana Halpin

Homelessness: the warning hidden in plain sight

The pithily titled DCLG Homelessness Prevention and Relief statistics are out today. These annual statistics are rarely ever talked about. Just contrast today’s deafening silence with the buzz about the bedroom tax stats last week.

But their bureaucratic veneer masks important figures we need to be talking about.

Today’s statistics are different to the DCLG figures on statutory homelessness. The statutory homelessness figures look at households who have been through a legal assessment to determine whether they are homeless or not, who may then be found legally homeless.

The homelessness prevention and relief statistics count up actions taken by councils (such as negotiating with landlords who want to end tenancies or tackling bad conditions) to help people avoid losing their homes – which is known as ‘prevention. ’

They also cover action taken by councils to rehouse households who have lost their home (though not legally recognised as homeless) – this is known as providing ‘relief.’

The 200,000 plus cases of homelessness prevention and relief dealt with by councils last year are a warning sign hiding in plain sight, of the potential for tens of thousands more families to face homelessness and put already over-stretched councils under intolerable strain.

They highlight the failures in the housing system and strains in the welfare system.

They highlight the short-term, sticking plaster solutions and incentivisation schemes being used by councils desperate to stem the tide of homelessness.

In short, if you want to understand what’s happening on the front line of the housing crisis, you need to look at these figures.

So what do they show?

1. In 2013/14 councils had to take action in over 200,000 cases to help households avoid or relieve homelessness

Councils are seeing more cases than they have ever seen. Over the last 5 years there has been a massive 38% increase in people getting help.

2. They are a sharp reminder that the scale of homelessness is likely to be greater than statistics on the number of legally homeless households that DCLG produce every quarter.

In addition to the 81,900 households found to be formally homeless , today’s figures mention 18,500 cases of people being helped by councils who weren’t assessed under homeless legislation but had lost their home. These households could be a subset of the homelessness cases in the chart below or they could be additional. It’s hard to tell. And that’s not good enough.

3. They indicate that housing benefit changes are definitely taking their toll.

A whopping 24,400 of the cases seen by councils involved helping people with housing benefit-related issues. We already know from the government’s own statistics that 59% people are in rent arrears because of the bedroom tax. What these figures tell us is, unsurprisingly, benefit cuts are driving people to turn to their council for help in keeping their home or finding alternative affordable accommodation. The fact that housing benefit issues can no longer be covered by Legal Aid might explain why so many cases are coming through to local authorities.

4. Right now, the private rented sector is both part of the problem and part of the solution.

What these figures show is the dependency of the council on the private rented sector.  In 3,500 cases, the council took action by putting people into the private rented sector, most likely on minimum six month contracts with no requirements to ensure the homes are suitable, as is the case with placements of homeless people in the PRS. Placing a household in the private rented sector sometimes involves ‘incentivising’ landlords through ‘golden handshake’ type arrangement – such as paying £2,000 ‘finder’s fees.’ This is all in the context of the end of private rented tenancies being the leading cause of homelessness.

4. The burden of housing and homelessness problems is firmly on local councils.

Local authorities are bearing the burden of a housing benefit system and private rented sector that is creaking at the sides.

They are seeing more people than ever come to their doors. And all in the context of shrinking budgets.

We are concerned that local council practice will increasingly start to suffer.  I wrote earlier in the year that if this continues councils will struggle to cope to provide vital homelessness services.

Recent reports suggest this is coming to fruition and that the true scale of homelessness could be even greater.

 

 

Pete Jefferys
 
I’m a Policy Officer at Shelter and interested in how we can get housing up the political agenda, secure a better deal for private renters and get affordable homes built. Outside of policy, I love exploring new parts of London, sport and going back home to Devon.

View all posts by Pete Jefferys

By Pete Jefferys

Housing in England: three things you should know

Housing remains a top five issue of concern for voters: above crime, education, Europe and pensions. Will it stay there? Today, the government published its full annual research report into the state of housing which may provide us some clues. Here’s three things you should know:

(1)   The big switch

One big macro trend in housing is often reported to be the relative boom in private renting compared to the relative decline of more secure, affordable rented homes (like renting from a council or housing association). Almost four million households are now private renters – which gets close to 10 million people in England – so this really is significant.

However, as you can see from Figure 1.1, the trend within home owners is just as interesting. The number of ‘outright’ owners who have paid off their mortgages has risen just as the number of those buying with a mortgage has declined.

The result of this across the country is a growing number of two groups:

  • Asset owners with very low or negligible housing costs.
  • Non-asset owners with higher housing costs.

This is a big structural shift from where we have been over recent decades, when the story was the rise of ownership with a mortgage.

(2)    Going with the flow

The most interesting graphic in the English Housing Survey is the tenure ‘flow chart’. While it looks scary, it tells a hugely interesting story about the state of housing today. The numbers on the chart are thousands of households and the flows are representative of what has happened to households who’ve changed their tenure (or become a household) in the last year.

So what’s the story? Well, I think what’s most interesting is the fact that the flows between the private rented sector (PRS) and owner occupiers are equal. You might expect more people to be going from renting into owning a home but that’s not been the case over the last year. This could be a story about owners losing their homes after falling into arrears, but repossessions are (historically) quite low. Instead it might be people who are renting out the home they own and going into the PRS themselves. This could be due to not being able to afford the next step on the ladder after starting a family, with three beds proportionally much more expensive than two beds.

Also of interest is that the scale of churn within the private rented sector, with around one quarter of all households in the PRS having moved in the last year. Great business for letting agents, less good for landlords who might have voids and renting families who need stability.

(3)    The enormous income vacuum

Perhaps the most important data in the government’s survey though is on the affordability of homes. The survey tells us that private renters spend a gigantic 40% of their income on their rent (47% before housing benefit), compared to 20% of income on mortgage payments for owners.

If private renters paid the same rent as social renters, then private renters would save £2,860 per year on average each. Across all 4m private renting households, that’s a staggering £11.4bn per year extra rent being paid, compared to the social rent median.

If you want to increase the spending power of millions of middle and low income households, then finding a way to reduce their weekly rent payments (such as building more affordable homes) would be a good place to start.

In conclusion…

Despite the housing market “recovery” (i.e. rising house prices), the big fundamental, structural shifts in England’s housing look unchanged. More and more households are renting privately and among those who can own, the trend is towards the outright owners and the decline of the mortgagee. The private rented sector is sucking in most new households and – despite perceptions – there are just as many households going from ownership to the PRS as vice versa. Finally, the disparity between the impact on household finances of being an owner and being a private renter is huge. It’s a big deal for the economy more broadly too, as a growing number of families find there’s very little left over once the rent has been paid, with a dampening impact on consumer spending.

It looks like housing won’t drop out of the biggest issues of concern for the public any time soon.

 

Steve Akehurst
 
I’m a Public Affairs Officer at Shelter, and work on getting affordable housing up the political agenda. I’m particularly interested in how housing relates to living standards in the UK. Outside of work, I enjoy reading, writing and putting in painfully mediocre 5-a-side performances.

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By Steve Akehurst

Housing in the reshuffle: big shoes to fill, and an even bigger challenge

Yesterday’s reshuffle was a mixed bag for housing: the good, the bad and the unknown.

On the positive side of things, the housing portfolio was combined with planning and returned to Ministerial status – after being demoted to Undersecretary level last year.  This starts to reflect how important housing has become as an issue to voters and politicians alike.  Housing is now consistently a top 5 voter issue (YouGov) and for the first time in years it looks like it’s going to be a big issue at a general election.

It’s little wonder why.  On the same day as the reshuffle, new research by the IFS that showed home ownership among young people has halved in the last twenty years. And it’s only going to get worse on current trends. This is worrying not only those affected, but their parents too.

Less good was the loss of Nick Boles, a Planning Minister who had shared Shelter’s understanding of those affected by the housing crisis and some of the possible solutions for tackling it.  Boles has been one of the best allies those affected by the housing shortage have had in government in recent years. Though we didn’t always agree with him on everything – we’ve always said solutions need to go beyond planning reform alone – he grasped the urgency of the housing shortage and its consequence for the aspirations, security and wellbeing of an entire generation – and he made the argument in those terms. Often against pretty entrenched vested interests.  It’s a shame this fight seemed to take its toll.

We also lost Kris Hopkins from the housing brief, who stays within CLG but without the housing portfolio.  Again, we haven’t agreed with Mr Hopkins on everything, but it was under his stewardship that improving private renting has risen up the government’s agenda. He has initiated impressive reforms that we are optimistic will continue to flourish.  In particular, it has been during his time in office that the government has started to consider introducing a ban on ‘revenge eviction’ – where renters who report poor conditions to their landlord or local authority are served an eviction notice.   There is now a Private Member’s Bill on the cards that could change the law to introduce this ban: a change that would improve the lives of hundreds of thousands of private renters.

Which brings us to the unknown: Brandon Lewis, our new Minister of State for Housing and Planning.  He has already been working within the Department for Communities & Local Government, so he should be familiar with the issues.  But even so, he will need to get up to speed quickly.  He faces a housing shortage that is reaching crisis point – if nothing is done, half of all under 35s will be living in their childhood bedrooms by 2040 – and yet CLG’s own figures predict a drop off in the number of new houses built next year. We’re still not even building half of what we need.  Furthermore, he is responsible for oversight of a private rented sector in which a third of all homes fail to meet his Government’s own standards, and a third of all renters are on 6- or 12-month contracts.

Mr Lewis might also have to contend with increasingly disgruntled councils who will find themselves with less and less money available over the next few years to help those in dire need of housing support. Big problems lie ahead as the funding for Local Welfare Assistance Schemes is being scrapped next year and the future of Discretionary Housing Payment funding is worryingly unclear.

All in all, there can’t be many more urgent areas of policy facing the next 10 months of this Parliament.

It’s just as well for Mr Lewis, then, that help is at hand.  Shelter have worked with KPMG to provide the blueprint he needs to start building the homes we need.  We’ve also set out how he can make the private rented sector more stable and improve conditions for those living in it.  And we’ve even given some thought to how the welfare state can be reformed to help everyone in housing need.

The new Housing Minister has a lot on his plate, but also a huge opportunity to make progress on one of the biggest issues of concern facing voters, and get credit from them for doing so.  As ever we’re standing by to help.

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