Brian Robson

Trafford Housing Trust a Living Rent Landlord

Description: Living Rents moves rent away from any link to the housing market. Instead, rents are directly linked to local earnings.  That’s a big change compared to existing models, which have set rents in relation to market rents (Affordable Rents) or largely based them on property values (Social Rents).

The methodology is based on use of the Annual Survey of Hours and Earnings, which provides earnings figures for each local authority.  The income used to anchor these rents is the net lower quartile earnings figure – at national level this is £253.60, equivalent to an average week’s minimum wage earnings (£253).  In Trafford the lower quartile earnings figure is £258.60.

Living Rents is an attempt both to balance levels of affordability and supply, and to create a bold but practical model that anchors rents in the reality of the changed labour market.

Improvement: An evidence-based method of linking rents directly to the labour market likely to be accessed by those on low incomes.

Brian Robson / JRF’s contribution to Rental Matters

 

Trafford Housing Trust : A Living Rent Landlord?

There are now over 1,000 accredited Living Wage employers in the UK, including of course, Trafford Housing Trust and the Joseph Rowntree Foundation.  This number has more than doubled in recent years, and it’s great to see employers recognising that this can improve the lives of workers and enable them to demonstrate social responsibility.

However, important though it is, JRF recognises that a focus on increasing incomes can only go so far to realising our vision of a prosperous and poverty free UK.  If we are to make our vision a reality, and THT are to achieve a ‘society transformed, free from poverty, inequality and injustice’, we also need to consider how we can reduce costs and make incomes go further.

Housing costs clearly have a large role to play in this.  We know that 3.1 million more people find themselves in poverty after they cover their housing costs.  These can be high – for example, those in the bottom fifth of the income distribution living in private rented accommodation spend 55% of their income on housing costs[1].

Traditionally, social housing has played a key role in limiting poverty.  Indeed, JRF’s research finds that ‘Social housing is highly targeted on people with low incomes and has been shown to be the most ‘pro-poor’ and redistributive major aspect of the entire welfare state’[2]The issue is with social housing now is two-fold: there is not enough; and that which is available is largely being let at Affordable Rents linked to market rates.

The consequences of these two factors are stark. By 2040, JRF research finds that setting social rents closer to market levels will push an extra 1.3 million people into poverty, and poverty can only be contained at current levels if social renting continues to form the same proportion of the housing market as it did in 2008.  If social housing is not available, we know that those on low incomes are likely to be housed in the private rented sector, where rents can represent over half of incomes.

So issues around social housing supply and rent levels are critical to addressing poverty.  Yet, despite the sectors’ history, JRF’s Poverty Focussed Review of Landlord Strategies[3] (forthcoming) finds that poverty is rarely mentioned when social landlords set out their priorities.  JRF want to see this change, and our own Housing Trust is clear about its intent to be an ‘anti-poverty landlord’.

The Poverty Focussed Review identifies that landlords are now generally building affordable rent properties as to do otherwise would entail too large a reduction in development. There are differing views on who should be housed in the resulting Affordable Rent properties – with some landlords prioritising working households, and others feeling that those in receipt of full housing benefit were most suited to these higher-rent properties. The danger is that those individuals trying to cope with the increasingly dynamic labour market, those who find themselves in a ‘low pay – no pay’ cycle, fall into neither group.

It is this increasingly dynamic labour market that provides the context for ‘Living Rents’ – a new development framework for affordable housing developed by Savills on behalf of JRF and the National Housing Federation[4].

Living Rents moves away from any link to the housing market. Instead, rents are directly linked to local earnings.  That’s a big change compared to existing models, which have set rents in relation to market rents (Affordable Rents) or largely based them on property values (Social Rents).

The methodology is based on use of the Annual Survey of Hours and Earnings, which provides earnings figures for each local authority.  The income used to anchor these rents is the net lower quartile earnings figure – at national level this is £253.60, equivalent to an average week’s minimum wage earnings (£253).  In Trafford the lower quartile earnings figure is £258.60.

The Living Rent for a one bedroom property is therefore based on 28% of net lower quartile earnings in the local authority concerned. Rents for larger properties are calculated using the recognised OECD equivalisation scale and data on existing letting patterns.  The rent produced varies by local authority, but is generally slightly above a social rent, but substantially below Affordable Rents or private rented rates.  The approach to equivalisation also results in a wider differential between rents according to bed size.

The rents that arise for Trafford are provided below.  Whilst it is accepted that these are higher than the prevailing social rents, the real comparison for a low income household in housing need today is likely to be a choice between Affordable Rents (if a property can be accessed) or the private rented sector.

Trafford 1-bedroom/week 2-bedroom/week 3-bedroom/week
Living Rent[5] £72.41 £94.13 £115.85
Social rent[6] £69.30 £80.31 £92.12
Affordable rent[7] £81.78 £106.66 £125.67
PRS rent (lower quartile)[8] £110.39 £143.74 £172.48

 

The model can deliver at scale.  The framework developed for JRF and NHF by Savills is based on providing 40,000 homes per year at Living Rents as part of a larger programme including 40,000 additional homes for shared ownership or intermediate rents.  This requires additional investment and enabling, but the benefits are clear.

Living Rents is an evidence-based method of linking rents directly to the labour market likely to be accessed by those on low incomes. It is an attempt both to balance levels of affordability and supply, and to create a bold but practical model that anchors rents in the reality of the changed labour market.  The particular methodology developed in the report may not be right for every landlord or every locality, but the principle of linking rents to earnings is one that JRF believes should play an important role in the future provision of genuinely affordable housing.

About Brian Robson

Brian Robson is a Policy and Research Manager at the Joseph Rowntree Foundation (JRF) where he leads JRF’s Housing and Poverty programme.  The programme aims to set out policy and practice approaches to enable more effective housing responses for those living in poverty in the UK.

Before joining JRF in February 2015, Brian worked at the Northern Housing Consortium as Policy and Strategy Manager, leading the Consortium’s programme of policy and research work on economy and enterprise.  This led to a keen interest in the spatial impact of policy, which Brian followed up by studying for an MA in Regional Development and Spatial Planning at Newcastle University.

Prior to 2010, Brian worked as a member of the National Housing Federation’s head office policy team, with responsibility for the NHF’s work on localism.    His career in housing began at a large London housing association and included spells working in housing management, stock transfer and service improvement. Before this, he spent time working in politics, including as a parliamentary researcher.

You can contact Brian at Brian.Robson@jrf.org.uk.

 

 

 

[1] MacInnes, T. et al, Monitoring Poverty and Social Exclusion 2014. York: JRF. Available at http://www.jrf.org.uk/sites/files/jrf/MPSE-2014-FULL.pdf

[2] Tunstall, R. et al, The Links Between Housing and Poverty: An Evidence Review. York: JRF. Available at http://www.jrf.org.uk/publications/housing-and-poverty-links

[3] Clarke, A. et al, How do landlords address poverty? York: JRF (forthcoming)

[4] Collins, H. and Lupton, M. Living Rents: A new development framework for affordable housing. London : Savills. Available at http://www.savills.co.uk/_news/article/72418/189253-0/6/2015/-living-rents–would-boost-affordable-homes-delivery-and-cut-the-housing-benefit-bill

[5] Source: Living Rents by Local Authority, 2014

[6] Source: Statistical Data Return 2014 Dataset, THT General Needs Owned Stock Average Weekly Rent

[7] Source: Statistical Data Return 2014 Dataset, THT Affordable Rent Owned Stock Average Weekly Rent

[8] Source: VOA Private Rental Market Statistics October 2013 to September 2014