Housing benefit cuts prompt rent rises

The Institute for Fiscal Studies (IFS) has said that households on low incomes are left exposed to rent increases as housing costs dominate their spend.

The cost of housing for low-income renters report says that ‘substantial’ recent cuts to housing benefit had led to rental payments using up an average of 28 per cent of the non-housing benefit income of low-income private renters. This is an increase from 21 per cent in the mid-1990s.

Furthermore, those on low incomes were defined as being in the bottom 40 per cent of the income distribution in their area. Tenants on lower incomes tend to spend greater fractions of their income on rent, even after accounting for the support they received through housing benefit.

The IFS said that the lowest-income fifth spend an average of 35 per cent of their non-housing benefit income to pay the part of rent not covered by housing benefit. This compares to 19 per cent for the highest-income fifth.

Agnes Norris Keiller, author of the report, said: “The current approach effectively places most of the risk of further rises in costs on to low-income tenants, and little on the housing benefit bill. While containing the cost to taxpayers, it leaves housing benefit vulnerable to becoming increasingly irrelevant with respect to its purpose: maintaining the affordability of adequate housing for those on low incomes.”