England’s distorted economic recovery pushes extra 310 working people a day onto housing benefit

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England may finally be emerging from recession but the recovery is distorted and leaves the country with two broken housing markets, according to a new report.

10 December 2013

Whilst economic growth has returned to many areas, this has caused the already over-stretched housing market there to overheat. Meanwhile, in parts of England where green shoots are nowhere to be seen, high unemployment and low wages mean families are desperately struggling to make ends meet and communities are at a standstill.

Home Truths, by the National Housing Federation, shows that rising rents in growth areas such as London are helping to push more and more working people over the edge, forcing an extra 310 people every day – one working person every five minutes1 - to turn to the Government for housing benefit to keep the roof over their heads.

Hard-pressed taxpayers have picked up the tab of £12.1bn spent on housing benefit for working people since 2009, at a cost of an extra £1.7m a day2, as successive years of not building enough homes in areas of growth have pushed rents beyond what ordinary working families can afford.

By 2020, the picture will be even bleaker. House prices will have risen to the point that an entire generation will be locked out of home ownership and forced to rent for life. But rents too are forecast to soar by an average of 39% by 20203, causing further severe financial consequences for the taxpayer.

Home Truths found that:

  • England is already extremely short of housing and the gap between supply and demand is widening. As a country we need 240,000 homes a year just to meet demand but house building numbers are falling. In 2012/13 107,000 new homes were built, 10% less than in 20094.
  • Rents are soaring out of the reach of many. Currently rents take up an average of half of people’s disposable income but in a decade’s time that figure will have rocketed to 57%5.
  • House prices will increase by another 35% by 2020, leaving a huge swathe of the population locked out of home ownership for life.
  • One working person every five minutes is turning to housing benefit to help make ends meet, with the number of employed claimants up 104% since 2009. As a result, Government spending on housing benefit has risen to £24bn, but most of this money is going to private landlords rather than building the new homes which would stem rising housing costs.

While the housing market in areas of growth is overheating, the story is very different in parts of England where green shoots are nowhere to be seen. High unemployment and low wages means families are desperately struggling to make ends meet. Far more focus needs to be put on regenerating these communities and bringing employment back.

David Orr, chief executive of the National Housing Federation, says:

“We hear a lot about ‘making work pay’, but a decent job won’t even cover the cost of a home in England. Billions of pounds of taxpayers’ money is wasted, lining the pockets of private landlords, when it could be better spent building more homes people can afford. Relying on the private rented sector so heavily is a costly sticking plaster rather than a solution.

“In towns and cities pulling away from the recession the dysfunctional housing market is burning the fingers of many people. Hard-working families are spending more and more of their income on a home and many could be forced to move - away from jobs, schools and relatives. We need to address the problems of the housing market now, before another generation is left locked out and reliant on taxpayers to keep the roof over their head.’

To fix both England’s housing markets we need to build more homes in the areas that are growing economically, and at the right prices that people can afford. In areas that are stalled economically we need Local Enterprise Partnerships (LEPs) to work with housing associations and other partners to revitalise struggling communities, create jobs and invest in social enterprise. 

Notes to editors:

  1. Since 2009 an average 310 working people a day – one every five minutes – have claimed Housing Benefit. Average figures taken from Department of Work and Pensions statistics and National Housing Federation calculations, 2013.
  2. Average figures taken from Department of Work and Pensions statistics and National Housing Federation calculations, 2013.
  3. Oxford Economics projections, 2013.
  4. DCLG figures adjusted using HCA totals for housing associations.
  5. Oxford Economics projections, 2013.
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