Renting a property in today’s housing market is almost completely unaffordable for low income families, according to new research from the Resolution Foundation.
The report defines affordable rent as no more than 35% of net household income, assuming this income is around £22,000 a year.
On this basis, the Resolution Foundation has found that the private rental sector in 125 UK local authorities is unaffordable for this demographic.
The south and south east (driven by London) are classed as the most unaffordable areas for low income households.
Vidhya Alakeson of the Resolution Foundation says the problem is driven by steep house prices, making renting the only option. She says, “Home ownership is out of reach for the vast majority of low to middle income families because few have the savings needed for a deposit.”
This has driven demand in the private rental sector where supply is low, pushing up rents.
In response to the report, Housing Minister Mark Frisk described its findings as “alarmist”.
He says “It fails to recognise that housing benefit provides a safety net which ensures that up to a third of private properties in most areas are affordable to low income families.”
The Government is attempting to manage affordability in the private rental sector with the Build to Rent scheme and £10bn worth of loans for building properties just for rent. Help to Buy, assisting people buy homes worth up to £600,000, should take demand away from the rental sector and have a knock on effect on rental affordability.
With the schemes in their infancy only time will tell if the Government can successfully tackle the affordability issue with these incentives, or whether they have risked creating a new house price bubble by inadvertently driving house prices upwards.
Original article and all quotes from BBC News.