Only one in 20 (5%) newly listed private rental properties on Zoopla in the first quarter of 2023 was affordable typically for housing benefit or universal credit recipients, according to the Institute for Fiscal Studies (IFS).
“Frozen and falling” housing support and rising rents are behind the squeeze on the availability of affordable properties, it said.
The IFS, whose research was funded by the Joseph Rowntree Foundation (JRF), defined rents as being affordable if they could potentially be completely covered by benefits.
Its report highlighted two points “worth noting” about the research.
It said: “First, because rents are generally higher for new lets than for the stock of rented properties, the share of new lets that are ‘affordable’ is likely less than the share of all properties that are affordable.
“Our analysis should be thought of as most representative for a family looking to rent a new property – though again, in the long run, the stock of rents and new lets must converge.
Anecdotally, there has been an increase in hopeful tenants paying above the advertised rent— IFS report
“Second, in the Zoopla data, we only observe advertised rent. In reality, negotiations between landlord and tenant mean that rents can be higher or lower than that. Anecdotally, there has been an increase in hopeful tenants paying above the advertised rent.”
On average, housing costs amount to 11.4% of UK households’ incomes, the report said.
It said: “Housing tenure is strongly predictive of living standards: social renters have a poverty rate based on incomes after deducting housing costs (AHC) of 46%, private renters 34%, mortgagors 11%, and those who own their home outright 15%”.
The report continued: “Any serious attempt to boost living standards, and particularly to tackle poverty, is likely going to have to grapple with housing costs.
“Over the past two years, rapidly rising rents and mortgage interest payments have brought renewed attention towards housing policy.”
Local housing allowance (LHA) rates – which govern the maximum amount of support for their rent that low-income private renters can get – have been frozen in cash terms since April 2020, the IFS said.
With housing support frozen and falling well behind rents, only one in 20 newly listed private rental properties could be covered by housing benefit— Tom Wernham, IFS
The report said: “This means that the support available for private rents is steadily declining in real terms – something that is especially important at the moment as rents are rising very rapidly.”
Rising mortgage rates are also likely to feed through into the rents being asked as they push up landlords’ costs.
There were also some suggestions last week, as the Bank of England base rate was increased from 4.5% to 5%, that some landlords could sell up as their profits become more squeezed.
According to figures released separately by Moneyfactscompare.co.uk, the average two-year fixed-rate homeowner mortgage on the market on Monday was 6.23% and the average five-year fixed-rate residential deal was 5.86%.
Tom Wernham, research economist at the IFS and co-author of the report, said: “With housing support frozen and falling well behind rents, only one in 20 newly listed private rental properties could be covered by housing benefit.
“And the properties that are covered by benefit rates are of lower quality and more expensive to heat than the average. If these benefit freezes are maintained, private rents will become increasingly unaffordable for those on low incomes.”
Younger people on low incomes are particularly likely to be living in private rented accommodation, the report said.
Darren Baxter, principal policy adviser at the JRF said: “As more people on low incomes rent privately, it’s crucial that the Government unfreezes LHA and ensures it reflects market rents so that families aren’t forced to choose between homes that are unsafe or homes they can afford.”
A Government spokesperson said: “We’re helping ease the pressure of rising rents by maintaining 2020’s £1 billion boost to local housing allowance rates, giving more than a million people an extra £600 a year on average.
“We are set to spend over £30 billion on housing support this year, on top of significant cost-of-living support worth an average £3,300 per household.
“Building more affordable homes is key, which is why we’re investing £11.5 billion to deliver more social and affordable rented homes across the country.”
