Five million private renters 'risk housing crisis without wage'

More than five million working rental sector tenants are at risk of being unable to cover their housing costs if they lost their wage, a report estimates.

The research, authored by Steve Webb, a former pensions minister, warned the growth of the rental sector in recent years, combined with possible post-EU referendum rises in unemployment, could create a "toxic cocktail" for tenants who may find they are not eligible for housing benefit or that it may not fully cover their rent.

The report found a steep rise across the UK in the number of working people who would potentially be at risk of being unable to meet their rent if they lost their wage through unemployment or sickness.

Based on analysis of the Government's Family Resources Survey, the report published by Royal London found that in 2013-14, 5.5 million working adults would not qualify for full housing benefit if they lost their job.

The number at risk represents nearly three-quarters of all working renters. The figure has more than doubled in a decade from around two million estimated to be at risk in 2003-04.

It said the growth in renters at risk if they lost their income reflects the combined effects of a general increase in the number of private renters, previous increases in employment levels and a series of cuts to the generosity of housing benefit.

Last week, a report from Shelter found working families in England are so "stretched to breaking point" that one in three could not afford to pay their rent or mortgage for more than a month if they lost their job.

Rising house prices have left many people facing the prospect of renting for longer. In 2013-14 around 7.7 million working adults were living in rented homes, nearly doubling from the four million who were in this situation a decade earlier.

Mr Webb, who is now director of policy at Royal London, said: "Renting has gone from being a transitional phase that younger people do before buying to something that more couples and families do for the longer term."

Finding you are suddenly unable to cover the rent and may have to move elsewhere could pose particular problems for families with established links to a particular area, such as their children being at school there.

The report found more than one million children could be at risk of their family having to move home because of gaps in the benefits system if a parent were to suffer a loss of income.

Mr Webb continued: "Rising unemployment and a surge in the number of private renters could create a toxic cocktail where working renters discover to their cost that there are large gaps in the housing benefit safety net.

"This report shows that the benefits system would not meet the rent of the majority of working renters. Unless they are able to resume paid work quickly, 5.5 million working renters would be at risk of not being able to pay the rent and having to move to cheaper accommodation, if they could find it."

The report found several groups of working renters who may find housing benefit would not fully cover their rent if they lost an income, some of whom may be affected by more than one factor.They include:

:: Couples who need two wages coming in to cover their rent. If one person in a couple lost their job, in many cases the one remaining wage would disqualify a couple from help with the rent.

:: Single people aged under 35 who rent privately. For this group, the benefits system only covers the cost of renting a room in a shared house.

:: People with "spare bedrooms". The benefits system bases help on the number of bedrooms you are deemed to "need", not on the actual property you are living in.

:: People living in more desirable areas. These renters may find benefits would not cover the rent and they may have to move elsewhere.

Debbie Kennedy, head of protection at Royal London, said: "When people take out a mortgage it is normal to think through how the mortgage would be paid if they were to lose their job or go off sick.

"But this conversation is much less common when people enter into a tenancy agreement. This report highlights the large number of people who could find that the support they expected is simply not there if they lost a wage."

A Government spokesman said: "We're determined to create a bigger, better private rented sector that meets the needs of tenants and encourages investment in quality homes for rent. That's why we've set out the most ambitious vision for housing in a generation, including £3.5 billion in Government-backed guarantees to attract more institutional investment into the sector.

"And we continue to spend around £90bn a year on working age benefits, including unemployment and sickness benefits, to ensure a strong safety net for the most vulnerable."

10 property hotspots
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10 property hotspots

In Scotland, Edinburgh is seen as a city with huge growth potential. In 2014, prices in Edinburgh were up 10% in a post referendum boom that shows little sign of slowing down.

Local agents are not expecting quite such stellar growth for the next 12 months, but they think price rises will be well above the average predicted for the whole country.

Rightmove named this as the area where it expects house prices to grow the most over the next five years. It says that over this period there will be a huge number of people moving out of London in order to afford to get onto the property ladder. They want a reasonable commute combined with plenty of attractions in the local area, and Southampton offers all this. With relatively affordable housing stock, it's a prime candidate for growth.

Luton was Rightmove's candidate for the second biggest house price rises over the next five years. It emphasised that this isn't a mater of opinion, it is the result of crunching the data.

Luton is another major beneficiary of the move out of London, and while it is arguably not as attractive a place to live as Southampton, it's only 23 minutes into central London - which rivals some of inner London's commuter times. With average prices of £179,368, it's clearly a far more affordable option, and the area has already started to show signs of a boom.

This was the third area suggested by Rightmove. As with Southampton, it is well positioned for London commuters, and also has huge local attractions.

A survey last year asked young professionals to name the place they would most like to live, and Brighton and Hove were the only areas that appeared on the list outside London.

One of the reasons it's not higher up the list is that houses are already on the pricey side, with an average cost of £338,956 - up 13% in the past year alone.

There may be few people who grow up with the dream of living in Swindon, but the electrification of the rail line to London will bring travel times down across the West Country, so Swindon becomes part of the outer commuter area.

Given that the average property costs £168, 968, it's easy to see why Swindon will be a popular option for commuters on a tight budget.

Bath is also going to benefit from electrification of the line, because the commute to London will fall to a manageable 70 minutes. The beauty of the city - along with a vibrant social and cultural life - makes it a clear choice for more long-distance commuters.

Of course, with an average asking price of £374,617, it's not a tremendously cheap place to buy, but the geography of the city restricts development, so these prices are expected to rise still further.

Property Frontiers says that the booming house prices in Oxford are set to get even higher. At the moment, travel to London takes 60 minutes, but this will reduce even further in 2016 when the line is electrified. Prices in the most desirable parts of the centre aren't much cheaper than London.

However, further out there are pockets of affordability, and when the Water Eaton station opens in 2015 it will open up areas to the north of the city too.

Manchester has seen enormous property price rises over the last couple of years, and Property Frontiers expects this to continue into 2015.

Other commentators are expecting the growth to slow over the next few years, especially given the gains made since 2012. However, demand for properties remains buoyant, and with the growth of the local economy, price rises seem inevitable.

Rising prices in London have pushed buyers further and further out of the centre, so estate agents are now claiming zone three as 'the new zone 2'.

Savills believes that the biggest gains over the next five years will be the less glamorous districts - putting the South and East in the frame. Gritty areas that could benefit include Ladywell, Streatham and Catford in the south, and Leytonstone, Forest Gate and Walthamstow in the east.

Cambridge could also perform well. It has already had house prices lifted by the growth of tech companies to the north of the city, and the arrival of pharmaceutical headquarters will help push prices up further.

In 2016 a new rail service from the city to the science park will keep prices rising, and beyond the opportunities presented by the local economy, Cambridge is also part of the 'outer commute' area of London, which Savills expects to shoot up in value over the next five years.


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