The Chancellor should invest in a scheme that could deliver 80,000 affordable homes a year for ‘just managing’ families in the Autumn Statement, according to the independent Joseph Rowntree Foundation (JRF).
England alone needs to build 243,000 houses per year, with at least 78,000 to cater to people for whom traditional home ownership is not currently a realistic or desirable option. Yet rates of house-building in England remain stuck at around half the level needed to meet existing and anticipated demand. Just 52,000 affordable homes were built last year.
“The number of people who privately rent their homes is growing fast, so the government must make sure that as a nation we build the homes that people need at a price that they can afford,” said Helen Barnard, head of analysis at JRF. “If private rents continue to rise further out of reach, we’ll see more and more people who are forced to make impossible choices as their rent takes up a growing chunk of their household budget.”
JRF recommends the Government invest £1.1 billion extra a year in affordable housing through a scheme called Living Rents, which links housing association and local authority rents to local wages, making them affordable to people earning the National Living Wage.
The package would help take the government a significant way to its target of building one million homes by 2020, delivering 80,000 homes each year in England: 40,000 of these would be at Living Rent levels, with the remainder for low-cost home ownership or intermediate rent. It would also cut £5.6 billion per year from the Housing Benefit bill by 2040, under the system in place when the model was developed.
The policy would let housing associations offer a mix of different housing types, including homes to rent, Rent to Buy and shared ownership, depending on what was needed in the local area.
JRF also recommends:
- The government should return to the earlier system of uprating working age benefits annually, ending the four-year freeze currently in place, as the price of essential goods and services begins to rise. When the pound fell sharply in 2007/8, the cost of essentials rose three times faster than average wages between 2008 and 2014. As low income households spend a much bigger proportion of their budget on essentials, this meant that they experienced higher inflation than better off families.
- Include low-wage sectors such as retail and hospitality in its plan for an industrial strategy to boost the pay and progression of low-paid workers and improve business productivity.
- Support regional growth by earmarking at least an equivalent level of funding to the European Structural and Investment Funds (ESIF) to create a Rebalancing Fund. Leaving the EU creates an opportunity to design a regional policy that responds to local priorities and opportunities, and bolsters the devolution agenda.
Ashwin Kumar, chief economist at JRF, said, “The Government’s ambition to help families ‘just managing’ is welcome and crucial at a time of economic uncertainty. Higher costs of goods and essentials impact on poorer families more, so ensuring support for those on low incomes keeps up is crucial. The poorest fifth of people in the UK spend £1 in every £6 of their income on food, much more than middle-income earners, so a price rise will have a bigger impact on the household budgets of less wealthy families. The four-year freeze on working-age benefits looks increasingly out-of-date and should be lifted.”