High rental costs causing ‘in-work poverty’

The Joseph Rowntree Foundation has claimed that high rental housing costs mean an estimated 3.8 million workers are in poverty, despite a recovery in the UK economy.

The Monitoring Poverty and Social Exclusion 2016 study suggests that this represents 12 per cent of all workers, standing at one million more workers than a decade ago.

The foundation argues that the rise is being driven by the UK’s housing crisis, particularly high costs and insecurity in the private rented sector, where the numbers living in poverty had doubled to 4.5 million in a decade.

A recent report by property agent Savills forecast that rents across the UK would rise considerably faster than house prices over the next five years, predicting that rents will go up by 19 per cent between now and 2021, while house prices will only rise by 13 per cent.

Analysis of the recent Autumn Statement by the Institute for Fiscal Studies (IFS) suggested workers would feel the squeeze on pay for more than a decade - earning less in real terms in 2021 than they did in 2008.

The report also highlights the difference in poverty levels across different regions of the UK, discovering that London has the highest poverty rate at 27 per cent, which is six per cent above the UK average.

On a more positive note, the employment rate for those aged between 16-64 is at its highest level (74.5 per cent), while the number of unemployed people has fallen to 1.6 million people, the lowest since 2007.

Helen Barnard, head of analysis at the Joseph Rowntree Foundation, said: “The UK economy is not working for low-income families. The economy has been growing since 2010 but during this time high rents, low wages and cuts to working-age benefits mean that many families, including working households, have actually seen their risk of poverty grow.

“As it negotiates Brexit, it is vital that the government does not allow its focus to slip from the domestic concerns that make a huge difference to people who are just about managing. This report shows that people on low-incomes cannot rely on economic growth and rising employment alone to improve their financial prospects. Families who are just about managing urgently need action to drive up real-term wages, provide more genuinely affordable homes and fill the gap caused by cuts to Universal Credit, which will cost a working family of four almost £1,000 per year.”