Housing costs and welfare reform significantly impact poverty levels in the UK

This latest report from the Joseph Rowntree Foundation and New Policy Institute analyses current data to present a comprehensive picture of poverty in the UK.  By examining both who is in poverty and how poverty effects people’s lives, the report offers a detailed account of poverty in the UK today. 

Among a number of key points, the report shows that:

• in 2014/15, there were 13.5 million people in poverty in the UK, equal to 21% of the population;
• in 2014/2015, there were 370,000 people living in poverty in Northern Ireland;
• there is a real risk of poverty for the growing number of people housed in the private rented sector;
• increasingly, the social security system does not cover essential living costs for those on low incomes.

Housing issues a significant driver of poverty

Issues in the housing market are a significant driver of poverty.  This is primarily, but not entirely, due to costs.  Housing is a basic need and for many households their biggest expense.  Poorer households pay a higher proportion of their income on housing costs, particularly those who rent.  More than 70% of private renters in the poorest fifth spend at least a third of their income on housing, compared with under 50% in the social rented sector and 28% for those who own their own homes.

“Housing costs are particularly important as a driver of poverty, particularly in the private rented sector, which now in many ways reflects the front line of poverty.” (p.10)

Experience of the housing market is increasingly determined by tenure.  The number of people living in poverty in the private rented sector has doubled in the past decade, from 2.2 million in 2004/5 to 4.5 million in 2014/15.  In Northern Ireland, 33% of people living in poverty live in the private rented sector.  There are now more private tenants in in-work poverty than in either the social rented or owner-occupied sectors. 

The impact of welfare reform on poverty

For many, having an affordable and stable home is partly dependent on the support they receive from the state.  Recent changes to the social security system have made this more difficult to achieve.  Examples of this include changes to local housing allowance rates, introducing the overall benefit cap and the bedroom tax.

“Social security matters for poverty because, on average, for the bottom fifth of the income distribution, benefit payments make up 45% of gross income.  Reductions to social security benefits have a direct impact on low‑income households’ finances.” (p.86)

There have also been broader changes to the UK’s social security system.  Previously, out-of-work state benefits represented the baseline of what families could be expected to be able to live on.  Changes to housing benefit (which now may not cover rent entirely) and the Jobseeker’s Allowance sanctioning regime (which potentially lengthens the period in which a claimant may be without income) now mean that new costs have to be borne on a fixed income.  These changes are to means-tested benefits, eligibility for which depends on having a low income.  Any reduction in these benefits therefore by definition hits those on the lowest incomes.

Housing is too often expensive, particularly in the private rented sector, and causes people to live in poverty.  The effectiveness of the social security system is at risk with upcoming welfare reform, particularly for low income households already struggling with basic living costs.  The report highlights the importance of addressing these problems, so that poverty levels decrease across the country.