Two-way street

(Originally posted on June 30 on Inside Edge 2, my blog for Inside Housing)

What does the evidence say about the links between housing and poverty?

In an age of austerity, food banks and the bedroom tax, the links may seem obvious. A housing policy based on letting housing benefit take the strain – relying on private renting and rising affordable rents – at the same time as it is being cut looks like a pretty good mechanism for creating poverty.

But evidence emerging from the Joseph Rowntree Foundation’s housing and poverty research programme (see my summary here) shows a relationship that is both more complex and more troubling. The housing system can act as a defence against poverty and deprivation (as it has in the past through social housing, housing benefit and the homelessness safety net) but it can also be a cause of them (as it did before through high housing costs and poor conditions).

As an illustration of that, last week’s Households Below Average Income figures from the DWP showed that around 15 per cent of people are in poverty using the principal measure of having an income of less than 60 per cent of the median before housing costs. That rises to 21 per cent after housing costs. So around 3.7 million people are in housing costs-induced poverty and most of them are renters: the proportion of social renters in poverty rises from 26 to 43 per cent after housing costs; and the proportion of private renters in poverty more than doubles from 17 to 37 per cent.

One message that comes through very clearly from the research programme is the role that low rents and secure tenancies can play in preventing poverty and improving work incentives. One study found that housing has profound impacts on work incentives for people competing for low-paid jobs that are disproportionately part-time and insecure. Contrary to media portrayals, there was no reluctance to work and nobody was satisfied with living on benefits. Instead the costs of housing, transport and childcare were creating multiple disincentives to employment and people were also reluctant to move because it would mean leaving behind support networks, especially for childcare. The study concluded that more secure tenancies would improve people’s willingness to move and lower rents would give them a much clearer financial incentive to work.

But current policy is moving in the opposite direction. The social housing system faces challenges including welfare reform, higher rents for new homes and reduced funding for development. At the same time growing numbers of low-income households live in the private rented sector.

JRF research into the impact of welfare reform raises basic questions about living standards for people living in social housing, who gets housed in it and what happens to the poorest households if they are excluded from it. The study concluded that tenants and social landlords alike are struggling with the impacts of welfare reform and that the ripple effect within communities is far greater than government figures suggest. The combined effect of a weakening of the national housing system and growth of discretionary, locally-determined policies has also led to patchy and inconsistent support for homeless and vulnerable households.

Another study set out to discover how landlords are responding to these challenges in their policies, strategies and business plans and what happens in practice. It found that there is a clear social ethos within the social housing sector but this is not always expressed in terms of addressing poverty. Most social landlords in England felt they had no option but to develop homes for higher affordable rents rather than social rents but there was uncertainty about who they should be housing: some were prioritising working households and setting stringent affordability tests; others still saw affordable rent as being for those in need of social housing, including the poorest.

Two identifiable themes emerged in landlords’ written strategies on selecting tenants: some re-asserted their traditional role of housing the poor but many are rethinking this and aiming to house a wider range of groups. This is creating tensions with local authorities, which need housing associations to house the poorest in order to fulfil their statutory obligations.

I’ve blogged before about two further studies in the programme. One on the housing market up to 2040 warns that the current trends of shrinking ownership, declining social housing and rapidly growing private renting will continue and that moves to set social rents close to market levels could push at least an extra 1.3 million people into poverty and cost an extra £20 billion in housing benefit. The second published earlier this month set out plans for a Living Rent to match the Living Wage to ensure that rents remain genuinely affordable.

In contrast, current housing policy relies on shallower public subsidy and higher rents for social housing at the same time as the government is looking to control the cost of housing benefit as part of a more general programme of welfare reform. Meanwhile the structure of the Labour market and falls in real earnings mean that housing is becoming more unaffordable for millions of people. This creates obvious tensions: contradictions between the policies of different government departments; problems for local authorities in carrying out their statutory duties; and dilemmas for social landlords questioning whether they should continue to look to house those most in housing need or those with higher incomes who can afford the rent.

In the two-way street between housing and poverty, that means choices for government and landlords alike. The implication of the research programme is that consideration of policy should start with a recognition of the role that low rents and secure tenancies in social housing can play in preventing poverty and improving work incentives. To enable that to happen, government will need to start to reverse the shift from bricks and mortar to personal subsidies to increase investment in social housing. This will also reduce long-term spending on housing benefit.

Tackling poverty, meanwhile, should be an explicit aim in social landlords’ business plans and strategies, including decisions on rent setting and procurement. All social landlords should aspire to become Living Wage employers and Living Rent landlords. And support for tenants coping with welfare reform through advice on employment, training, income maximisation, benefits and energy efficiency is essential.

That’s just a flavour of the evidence emerging from a research programme that also includes studies on methods of funding affordable housing, land supply and planning systems and building sustainable homes. My more detailed summary plus the reports published so far are available here.