Government’s proposed 80% affordable rents could bridge affordability gap for working poor

Government’s proposed 80% affordable rents bridge affordability gap for working poor – but £26k benefit cap leaves larger families facing shortfalls

• Cambridge University academics indicate market-pegged social rents are particularly unaffordable for families with three or more children.
• In four out of five local authorities looked at, a family on benefits would fall foul of the £26K benefit cap if renting at 80% of market rate.
• In one area (not in London) a couple with three children would face a shortfall of £56 per week if 80% rents were charged because of the total benefits cap.

Three- and four-bedroom homes charged at 80%of local market rents will be unaffordable for most benefit dependent families under the Government’s proposed £26,000 benefit cap.

New research commissioned by national affordable housing provider Affinity Sutton, which has more than 56,000 homes across the country, and produced by the Cambridge Centre for Housing and Planning Research, suggests a couple with three or more children would breach the benefit caps in four out of five local authority areas it examined.

The work, led by housing academic Christine Whitehead, examined the affordability of increasing social housing rents to up to 80% of market levels in five local authority areas across the country where Affinity Sutton has a significant number of homes.  These were Brighton and Hove, Bromley (Greater London), Hertsmere, Mid Sussex and Plymouth.

It found that, because of the overall cap on benefits, a couple with three children in Hertsmere would face a shortfall of £56 per week if 80% of market rents were charged on an Affinity Sutton property, while in Brighton and Hove the shortfall would be £34 a week.  The only area in the study where 80% rents could be sustained by a larger family dependent on benefits without resulting in additional hardship is Plymouth. 

In contrast, for small families (a couple with one child) rents at 80% of market rates would not breach the benefits cap in all five of the areas surveyed.

Significantly, the report also showed that the Government’s new affordable rent model could help fill the affordability gap for low income working families if they were able to obtain a new Housing Association property.  Private sector rents have spiralled to account for more than 40% of income for families in the lower quartile in all regions.

As can be seen from the table below, 4,200 low income families in Bromley looking for one or two bedroom properties can’t afford market rent – but over half of them would be able to afford rents set at 80%.

How affordable rent could help small working families currently priced out

NB: Number of small families excluded from private rented market and the percentage that could afford rents at 80% level.

Keith Exford, Chief Executive of Affinity Sutton, said:  “Whilst we welcome the flexibility introduced by the affordable rent programme, we don't believe that increasing rents to 80% of market levels across the board is appropriate. It could cause acute financial and affordability problems for new residents and this research demonstrates it will not work for larger families.

“We want to keep building new homes and this work indicates there are thousands of working families struggling to afford soaring private sector rents.  In the past, such families have rarely been awarded priority for social housing but the new affordable rent model should enable housing providers, like Affinity Sutton, to meet the need for well-designed homes for those on modest incomes. But this will also need new thinking about housing priorities from local authorities when making nominations to new homes.

“In response to the findings of this report (that larger family homes at 80% rents are less affordable) we plan to focus affordable rent on our smaller properties, which will be affordable for large numbers of potential residents and we plan to retain our larger properties as closely as we can to lower social rent levels.“

Alex Fenton, the researcher at the Cambridge Centre for Planning and Housing Research who carried out the modelling, said:  “The government’s new policy has very different potential and implications in different parts of the country. There should be a national assessment of the type undertaken for Affinity Sutton.”

Christine Whitehead added “The big question now is who is to be housed under the new regime: the low-income employed or those who will need housing benefit to pay the increased rents.”

To read more about our research visit The Observer newspaper which highlighted the study on 21 August.