Covid-19 Crisis brings Affordable Housing Commission recommendations into sharp focus

The core messages of the Affordable Housing Commission (AHC) should be given renewed focus in light of Covid-19, according to a statement on the AHC website. The Commission argues that the current crisis highlights the dangers of relying so heavily on the private rented sector to meet housing demand, pointing out that this sector often lacks the capability and organisation of the social housing sector that is necessary in order to effectively respond to this type of crisis situation. 

The individual circumstances of private sector landlords allow for sharp disparity in how private tenants who are struggling to pay rent at this time are dealt with, and restrictions on the level of assistance payable under benefits to assist with private rents makes this situation much more difficult for those who rent privately. The commission argues that the pandemic shows the private rented sector as "as a complex, disparate and often fragile sector that is ill-equipped to cope in emergency situations."

The final report of the Affordable Housing Commission

The Affordable Housing Commission (AHC) is an independent, non-partisan group established by the Smith Institute with the support of the Nationwide Foundation. It is chaired by Lord Best with 14 leading players from across the housing world. Over the past 18 months the AHC has undertaken a wide-ranging review of housing affordability in England. The final report, based on considerable evidence and new research, has over 50 recommendations covering key supply and demand aspects of affordability across all tenures and housing markets.

Defining Affordability

Starting with a redefinition of affordability and how to measure it accurately (not by market prices, but according to people’s actual incomes and real-life circumstances), the AHC finds that affordability is now a serious concern, particularly for large numbers of low-income households. A fifth of the population are spending disproportionately more on their housing costs – 40% of those in the bottom half of incomes now have an affordability problem with affordability a particular problem for low income private renters.

Who is affected by affordability issues?

The Commission identify three groups under the most housing stress due to affordability issues: struggling renters, struggling home owners, and struggling older households. Together these add up to 4.8 million households, representing one in five of all households in England and almost 40% of those in the lower half of the income distribution.

But it is in the private rented sector (PRS) that the greatest problems are found, with 2 million households in potential difficulty – representing 43% of all households renting privately. And the households devoting 40% or more of their incomes to rent – the group at highest risk – are predominantly in the PRS.

Over half of benefit claimants renting privately are in poverty – because the risk of poverty after housing costs increases substantially for private renters compared with those in social housing.

Why has affordability become such a problem for so many households?

The Commission believes there is an underlying structural problem at the heart of the affordability crisis, caused by the halving of low-cost social housing and the doubling of the PRS. This shift – which has taken place over 20 years – has left the housing system seriously unbalanced.

The report highlights that the expansion of the PRS has taken it beyond the scale at which it can best meet local housing requirements. While the PRS can work well for many young, mobile households – including students – the PRS has its limits. It should no longer be expected to provide for households for whom it is ill suited. In particular the report concludes that the PRS is not the solution for:

• lower-income households, where rents represent over 33% of take-home incomes;
• tenants in receipt of housing benefit that doesn’t cover their rent sufficiently;
• families who need the stability of long-term security, on affordable terms; and
• older and vulnerable people, for whom there are special considerations for safety and support, as well as affordability.

The report’s recommendations include:

• to rebalance the housing system to provide affordable housing opportunities for all by 2045. The Commission recommends that the government commits to ensuring that no child born today should face living in housing that is unaffordable for them by the time they are likely to form a household of their own.
• to make affordable housing a national priority and to put it at the centre of a national housing strategy, recognising that it is the lack of affordable housing that so often lies behind the problems of poverty, homelessness, debt, family breakdown, mental and physical poor health. Housing stress also has negative effects on people’s life chances;
• to adopt a new definition and measures of housing affordability, which relate to people’s income and circumstances;
• to increase investment in new social housing, alongside reforms to help rebalance the system away from the private rented sector to social housing. The changes to the PRS which they recommend imply a smaller but better, more professional PRS;
• to constrain rent increases, end Affordable Rent and reform the right to buy;
• to support first-time buyers stuck in the private rented sector by levelling the mortgage market, providing targeted support for deposits and increasing supply, recognising that many working people are frustrated that they cannot achieve home ownership – because it is impossible for most tenants to save a deposit when rents consume so much of their income;
• to improve the safety net for struggling renters and home owners, including providing housing benefit to cover the lowest 30% of rents in the PRS; and
• to bring all homes up to a safe and decent standard. The Commission was of the view that affordability could not come at the expense of quality. Therefore, those living in non-decent or overcrowded housing are also included in their alternative definition and measures of affordability.