Publication - Research and analysis

Rent affordability in the affordable housing sector: literature review

Published: 17 Jun 2019
Directorate:
Housing and Social Justice Directorate
Part of:
Housing
ISBN:
9781787818972

Information on definitions and measures of social rent affordability, the relationship between housing and poverty, rents in the affordable housing sector, the role of the mid-market rent sector and policies with an impact on rent affordability.

Rent affordability in the affordable housing sector: literature review
4. The relationship between housing and poverty

4. The relationship between housing and poverty

“Housing can both mitigate and exacerbate the experience of poverty; and it can be both a charge on income (rent and mortgage payments) and a source of income (benefits and rents)” (JRF 2013, p. 6). The relationship between housing and poverty has two dimensions: the impact of housing costs on poverty and the impact of poverty on housing conditions. Housing costs can lead to poverty (section 4.1) and poverty can lead to poor housing conditions that often lead to health and wellbeing issues, especially for children (section 4.2).

4.1 Impact of housing costs on poverty

Housing costs, such as rent and bills, take up a large proportion of households’ income (Tunstall et al. 2013). Low-cost housing might prevent poverty and material deprivation, as housing costs have a significant and direct impact on poverty and material deprivation (Tunstall et al. 2013, p. 70). Low-rent accommodation, such as social housing, as well as housing benefits aim to reduce housing-cost-induced poverty, i.e. the poverty after considering housing costs (Tunstall et al. 2013).

Housing-cost-induced poverty

Poverty rates tell a different story before and after housing costs have been taken into account. Professor Philip Booth wrote in 2017 “High housing costs are the single biggest driver of poverty in the UK”. Housing costs can lead to poverty or move households out of poverty (CAD 2015). For example, in 2013/14 280,000 people became poor only after housing costs were taken into account, of which 24% were social tenants (CAD 2015). Families with children and single adults are most likely to be led into poverty by housing costs (CAD 2015).

The most widely used definition of poverty is relative income poverty, a measure of whether the incomes of the poorest households are keeping pace with middle-income households across the UK. Individuals are considered to be in relative poverty if they are living in households with a household income below 60% of the UK median, taking into account the number of adults and children in the household. Figure 4.1 demonstrates that, between 2015-18, 900,000 (17%) people lived in relative poverty before housing costs in Scotland, which increased to more than 1 million people (20%) after housing costs were taken into account (Scottish Government 2019).

Absolute poverty refers to individuals living in households whose equivalised income is below 60% of the inflation adjusted median income in 2010/11[20]. Focusing on the absolute poverty rates, before housing costs, 15% of the Scottish population, equivalent to 780,000 people, lived in absolute poverty in 2015-18, which rose to 18% - 930,000 people - when housing costs were taken into account.

Figure 4.1 – Relative and absolute poverty rates for all individuals across time, Scotland

Figure 4.1 – Relative and absolute poverty rates for all individuals across
    time, Scotland

Source: Reproduced by Scottish Government report on Poverty and Income Inequality in Scotland: 2015-2018 (Scottish Government 2019), retrieved from https://www.gov.scot/publications/poverty-income-inequality-scotland-2015-18/. Source: Households Below Average Income, DWP.

Note: Relative poverty is defined as below 60% of UK median income, while absolute poverty as below 60% of inflation adjusted 2010/11 UK median income.

Disaggregating the 2015-18 indicator of relative poverty by age group, the level of poverty, especially after housing costs, appeared to be acute among children: 1 out of 5 children (200,000 children in absolute values – 20%) lived in poverty before housing costs, rising to nearly one quarter (equivalent to 240,000 children – 24%) when housing costs were taken into consideration (Figure 4.2).

Figure 4.2 – Relative poverty rates before and after housing costs by type of person 2015-2018, Scotland

Figure 4.2 – Relative poverty rates before and after housing costs by type of person 2015-2018, Scotland

Source: Reproduced by Scottish Government report on Poverty and Income Inequality in Scotland: 2015-2018 (Scottish Government 2019), retrieved from the https://www.gov.scot/publications/poverty-income-inequality-scotland-2015-18/[21]. Source: Households Below Average Income, DWP.

Housing costs and poverty by tenure type

The relationship between housing costs and poverty is strongly influenced by tenure type. Table 4.1 shows the proportion of people in each housing tenure who live in relative poverty after housing costs, and demonstrates the high percentage of social renters, and private renters living in relative poverty after housing costs. As seen above, during the years 2015/16 and 2017/18, 20% of Scotland’s population were living in poverty after housing costs. Broken down by housing tenure, 40% of social tenants were living in relative poverty after housing costs, compared with 34% of the private renters, 12% of those who own outright and 8% of owners with a mortgage.

Table 4.1 – Percentage of people in relative poverty (below 60% of UK median income) after housing costs by housing tenure, Scotland

All people

Rented from council or housing association

Rented privately

Owned outright*

Owned with mortgage

2003/04 - 2005/06

20%

43%

38%

12%

8%

2004/05 - 2006/07

19%

41%

35%

12%

9%

2005/06 - 2007/08

19%

39%

36%

12%

9%

2006/07 - 2008/09

19%

40%

36%

11%

9%

2007/08 - 2009/10

19%

40%

38%

11%

9%

2008/09 - 2010/11

18%

39%

36%

10%

8%

2009/10 - 2011/12

18%

36%

35%

10%

8%

2010/11 - 2012/13

18%

33%

36%

10%

8%

2011/12 - 2013/14

18%

34%

36%

9%

8%

2012/13 - 2014/15

18%

35%

35%

9%

9%

2013/14 - 2015/16

19%

37%

34%

8%

9%

2014/15 - 2016/17

19%

39%

34%

9%

8%

2015/16 - 2017/18

20%

40%

34%

12%

8%

Source: Households Below Average Income, DWP. Retrieved from https://www2.gov.scot/Topics/Statistics/Browse/Social-Welfare/IncomePoverty/povertytable (Supplementary poverty tables excel file – Table 3a)

* Due to a single very large household in the sample in this group in 2017/18, the latest estimate is significantly higher than those in previous years. However, further data points are required to confirm whether this marks an increasing trend in poverty.

Table 4.2 shows the tenure composition of those living in relative poverty. Of those living in relative poverty in Scotland between 2015/16 and 2017/18, 41% were social renters, 26% were private renters and the rest (33%) home owners.

Table 4.2 - Composition of people in relative poverty after housing costs by housing tenure, Scotland

All people

Rented from council or housing association

Rented privately

Owned outright*

Owned with mortgage

2003/04 - 2005/06

100%

51%

16%

13%

20%

2004/05 - 2006/07

100%

48%

17%

14%

22%

2005/06 - 2007/08

100%

45%

19%

15%

21%

2006/07 - 2008/09

100%

45%

20%

15%

21%

2007/08 - 2009/10

100%

43%

23%

15%

19%

2008/09 - 2010/11

100%

43%

23%

15%

19%

2009/10 - 2011/12

100%

41%

26%

15%

18%

2010/11 - 2012/13

100%

38%

29%

15%

18%

2011/12 - 2013/14

100%

39%

30%

14%

18%

2012/13 - 2014/15

100%

39%

30%

13%

18%

2013/14 - 2015/16

100%

41%

29%

12%

18%

2014/15 - 2016/17

100%

43%

28%

14%

16%

2015/16 - 2017/18

100%

41%

26%

19%

14%

Source: Households Below Average Income, DWP. Retrieved from https://www2.gov.scot/Topics/Statistics/Browse/Social-Welfare/IncomePoverty/povertytable (Supplementary poverty tables excel file – Table 3b)

* Due to a single very large household in the sample in this group in 2017/18, the latest estimate is significantly higher than those in previous years. However, further data points are required to confirm whether this marks an increasing trend in poverty.

Table 4.3 shows the proportion of children living in relative poverty after housing costs by housing tenure. In 2015-18, the percentage of children living in relative poverty after housing costs was similar in the social and private rented sectors (respectively 45% and 42%), 15% for those owned outright and 10% for those owned with mortgage. The proportion of children living in the social housing sector who were in relative poverty decreased overall between 2004-07 and 2015-18, but has seen a small rise since 2014-17.

Table 4.3 - Proportion of children in relative poverty after housing costs by tenure, Scotland

Year

Rented from Council or Housing Association

Rented privately - furnished or unfurnished

Owned outright*

Owned with mortgage

All children

2004-07

52%

44%

12%

11%

25%

2005-08

51%

43%

17%

11%

24%

2006-09

52%

45%

16%

10%

25%

2007-10

52%

44%

17%

10%

25%

2008-11

50%

40%

15%

10%

24%

2009-12

44%

35%

14%

9%

22%

2010-13

40%

36%

10%

9%

21%

2011-14

39%

39%

7%

10%

21%

2012-15

38%

41%

6%

10%

22%

2013-16

39%

43%

5%

11%

23%

2014-17

43%

44%

6%

10%

24%

2015-18

45%

42%

15%

10%

24%

Source: Households Below Average Income, DWP. Retrieved from https://www2.gov.scot/Topics/Statistics/Browse/Social-Welfare/IncomePoverty/povertytable (Supplementary child poverty tables excel file – Table 7a)

Notes: These tables provide numbers and percentages of people in relative and severe poverty in Scotland after housing costs. Individuals are in relative poverty if their equivalised household income is below 60% of the UK median income after housing costs. Individuals are in severe poverty if their household income is below 50% of the UK median income after housing costs.

These figures are calculated using three years of pooled data and cover the period from 2004/05- 2006/07 to 2015/16-2017/18. Using three years of data helps to ensure that sample sizes are sufficient to give robust statistics which is particularly important when considering poverty rates amongst relatively small groups. Note however that even using three years of data, most small changes over time will not be statistically significant. Care should be taken when comparing rates. Comparisons over longer time periods may offer a better indication of real change.

Numbers in poverty have been rounded to the nearest 10,000 people and percentages have been rounded to the nearest whole percentage point.

* Due to a single very large household in the sample in this group in 2017/18, the latest estimate is significantly higher than those in previous years. However, further data points are required to confirm whether this marks an increasing trend in poverty.

Housing and non-housing costs

According to the definitions and measures outlined in chapters 2 and 3 we have seen that affordability is not only measured based on housing costs, but also on non-housing consumption. Housing costs determine not just the quality of the home that people can afford, but also the amount of money that they have available to maintain their standard of living. Households with unaffordable housing would be at risk for a ‘trade-off’ between these two costs; lower the housing standards in order to afford more non-housing costs and vice versa. The poverty measure before housing costs recognises the fact that some households may spend more on housing in order to live in a better quality home (House of Commons Library 2018). However, according to the same report, spending more on housing costs does not necessarily mean that one lives in better quality home, since the quality of accommodation varies greatly within the UK. Therefore, the poverty measure after housing costs draws a better picture of the actual poverty in the UK.

A longitudinal study of the relationship between housing and poverty

Stephens and Leishman (2017) argued that the relationship between housing and poverty has been mostly studied using cross-sectional evidence referring to people’s experiences at a specific time point. Their research aims to overcome this burden using longitudinal data from the British Household Panel Survey (1991-2008) in order to study the long-term nature of the relationship between housing and poverty in the UK. Treating poverty as a static phenomenon tells us a different story from long-term or persistent poverty. They classified poverty as temporary, recurrent and chronic. They claimed that housing costs varied significantly between and within regions and different tenures and it was complicated to use one threshold for everyone. They treated the housing costs for renters (social and private) as ‘Rent minus Housing Benefit + water rates/charges + service charges’ (Stephens and Leishman 2017, p. 8). Among other findings, they highlighted that there is a very clear relationship between housing pathways (changes of housing tenure across time) and poverty in the UK. Persistent poverty was most strongly associated with social renters, where below market rents and housing benefits were not enough to keep people out of poverty, while home-owners were more associated with temporary poverty. The survey was conducted with people that were present in all 18 waves of the study, which means that those with more stable life circumstances are over-represented in the sample.

4.2 Impact of poverty on housing conditions

As mentioned above, poverty can have an impact on housing conditions, as it often leads to poor housing conditions.

Impact of housing conditions on health and wellbeing

Poor housing conditions[22] may have a negative impact on people’s health, wellbeing and life chances, especially for children (Shelter Scotland blog 2018[23]), which might lead to even higher rates of poverty. Housing conditions can have direct and indirect impacts on health. Living in low-quality households, i.e. cold and damp, overcrowded, with indoor pollutants and infestation, can have a serious impact on adult health and child development (amongst others Healy 2004; Liddell and Morris 2010). The effects of living in low-quality homes are seen in physical health problems (such as arthritis and frequent colds) and mental health issues (such as anxiety and depression) (Liddell and Morris 2010). People who spend a high proportion of time in the home, including older people, children, people who are disabled and people with long-term conditions, can be disproportionately affected (Shelter 2006). The relationship is complex since poor housing conditions often co-exist with socio-economic circumstances, which are independently associated with poor health. Poor housing conditions might also lead to accidents and domestic fires (Shelter 2006).

Impact of poor housing conditions on children

More than 90,000 children in 2009 in Scotland lived in overcrowded homes, one in ten lived in fuel poverty, and two thirds of social housing which children lived in had failed the Scottish Housing Quality Standard (Shelter 2009). Poor housing conditions affect children’s health, increasing the risk for health problems by 25% during childhood and early adulthood, including the risk for meningitis, asthma and slow growth, and the risk for mental health and behavioural problems (Shelter 2006). Moreover, poor housing affects the life chances of children and opportunities in adulthood lowering their educational attainment and increasing the likelihood of unemployment and poverty (Shelter 2006). In fact, in England and Scotland, parental home-ownership was found to contribute positively to children’s educational attainment (Tunstall et al. 2013, p. 56).

4.3 Summary

To sum up, there is evidence that housing costs can lead to housing-cost-induced poverty. Poverty in Scotland becomes more pronounced after housing costs are taken into account and poverty after housing costs is more acute among children. For this reason, the Scottish Government’s plan to tackle child poverty aims at reducing family housing costs (see section 8.1). Based on recent evidence, social renters are more likely to be in poverty after housing costs, as well as in persistent poverty. Finally, there is strong evidence suggesting that poor housing conditions might have a negative impact on people’s health, wellbeing and life chances, especially for children.


Contact

Email: dafni.dima@gov.scot