Working Poor Forced To Spend Half Their Income On Housing

[Sancho Panza]

Guardian 15/8/14

'Almost 1.6m homes are now forced to spend more than half of their disposable income on mortgage payments or rent as wages stagnate, according to figures published on Friday.

The Resolution Foundation said households struggling with housing costs were typically young people renting privately and living alone in one-bedroom properties in London.

Laura Gardiner, an analyst at the thinktank, which carried out the research, said the majority of people paying out half their incomes on housing were in work but on low and middle incomes, leaving little left over after housing costs to spend on other essentials.

Data from the estate agent LSL Property Services showed rents rising more quickly than inflation, increasing by 2% since July 2013. LSL said the average monthly rent across England and Wales was now £753.

The Council of Mortgage Lenders (CML) also issued a warning on interest rates on Thursday, despite reporting a fall in the number of borrowers struggling with repayments.

The CML's director general, Paul Smee, said: "Rates will rise at some stage, of course, and borrowers should be planning for that now. We welcome the message from the Bank of England that, when it raises rates, it plans to do so in a series of 'baby steps', matched to a careful assessment of the ability of households to deal with higher borrowing costs."

About 5,400 properties were repossessed by lenders in the spring, the CML said, bringing the total for the first six months of the year to 11,800 – the lowest number since the second half of 2008.

Almost a quarter of those homes, 1,300 properties, were on buy-to-let mortgages, while the rest were standard residential loans. The number of borrowers who had fallen behind on repayments also fell during the second quarter, the CML said.

While previous recessions have typically led to a rise in repossessions, during the recent financial crisis borrowers benefited from low interest rates, which allowed many households to meet repayments despite stagnant pay and other financial pressures.

The Bank of England has indicated that rates will rise within the next year, although a policymaker on its rate-setting committee said it would not act hastily. Speaking to BBC Radio, David Miles said the recent fall in inflation to below the Bank's 2% target was "very good news because it means that we're not going to be pushed into raising interest sharply". Indications that the property market could be cooling, particularly in London, could also take pressure off the Bank to raise rates to slow house price growth.

Bev Budsworth, managing director of the Debt Advisor, warned that many borrowers could struggle if rates did rise too quickly. "Although the economy is in recovery for some, for hundreds of thousands of people their finances are on a knife edge, held in check only by the historically low interest rate," she said.

"However, with wages at their slowest level of growth for over a decade, these people are merely 'treading water' in terms of their finances – often on interest-only mortgages and often with no financial contingency to cope with rising bills."'

[crashmonitor]

I guess that is one reason why the non working socially housed are blessed....depending on how you calculate their housing costs it is really zero % if you net out housing benefit. That still leaves little to live off for those of working age, but a rather comfortable position for the retired with minimum income guarantee and even disability enhancements over and above the netted out rent.

Edited August 15, 2014 by crashmonitor

[Ash4781]

Oh it's the resolution foundation again

[Executive Sadman]

Sympathy...until I saw the words 'in London'

Make housing cheaper there, more people will move there, such is the size of the commuter belt.

The wages need to go up. Or people need to move out of London and stimulate other areas.

[scrappycocco]

Need to amend title - working poor forced to spend half their income on housing because of the labour party.

[Executive Sadman]

Need to amend title - working poor forced to spend half their income on housing because of the labour party.

Which labour party? The blue one, red one, or yellow one?!

[Bill D'arblay]

I guess that is one reason why the non working socially housed are blessed....depending on how you calculate their housing costs it is really zero % if you net out housing benefit.

Not really. Even if they get 100% for their rent many have lost some of their council tax benefit. If their disposable income was £10pw before they have often lost 75% of their disposable income.

[John The Pessimist]

Guardian 15/8/14

'Almost 1.6m homes are now forced to spend more than half of their disposable income on mortgage payments or rent as wages stagnate, according to figures published on Friday.

The Resolution Foundation said households struggling with housing costs were typically young people renting privately and living alone in one-bedroom properties in London.

Laura Gardiner, an analyst at the thinktank, which carried out the research, said the majority of people paying out half their incomes on housing were in work but on low and middle incomes, leaving little left over after housing costs to spend on other essentials.

Data from the estate agent LSL Property Services showed rents rising more quickly than inflation, increasing by 2% since July 2013. LSL said the average monthly rent across England and Wales was now £753.

The Council of Mortgage Lenders (CML) also issued a warning on interest rates on Thursday, despite reporting a fall in the number of borrowers struggling with repayments.

The CML's director general, Paul Smee, said: "Rates will rise at some stage, of course, and borrowers should be planning for that now. We welcome the message from the Bank of England that, when it raises rates, it plans to do so in a series of 'baby steps', matched to a careful assessment of the ability of households to deal with higher borrowing costs."

About 5,400 properties were repossessed by lenders in the spring, the CML said, bringing the total for the first six months of the year to 11,800 the lowest number since the second half of 2008.

Almost a quarter of those homes, 1,300 properties, were on buy-to-let mortgages, while the rest were standard residential loans. The number of borrowers who had fallen behind on repayments also fell during the second quarter, the CML said.

While previous recessions have typically led to a rise in repossessions, during the recent financial crisis borrowers benefited from low interest rates, which allowed many households to meet repayments despite stagnant pay and other financial pressures.

The Bank of England has indicated that rates will rise within the next year, although a policymaker on its rate-setting committee said it would not act hastily. Speaking to BBC Radio, David Miles said the recent fall in inflation to below the Bank's 2% target was "very good news because it means that we're not going to be pushed into raising interest sharply". Indications that the property market could be cooling, particularly in London, could also take pressure off the Bank to raise rates to slow house price growth.

Bev Budsworth, managing director of the Debt Advisor, warned that many borrowers could struggle if rates did rise too quickly. "Although the economy is in recovery for some, for hundreds of thousands of people their finances are on a knife edge, held in check only by the historically low interest rate," she said.

"However, with wages at their slowest level of growth for over a decade, these people are merely 'treading water' in terms of their finances often on interest-only mortgages and often with no financial contingency to cope with rising bills."'

11,800 repossessions in the first 6 months of the year. Net out the 1300 BtLs, and you have 10,500 residential repossessions. Annualised that is 21,000 'strivers'/'hard-working families' out on their ear. What level of repossession is required for the MSM to start reporting on it as an issue?

It's only when we see regular articles in the MSM about VV's (Venger's Victims), will we enter the 'fear phase'.

[Bill D'arblay]

Need to amend title - working poor forced to spend half their income on housing because of the labour party.

Need to amend title - working poor forced to spend half their income on housing because of the policies of every ruling party since 1979.

[porca misèria]

Only 50%? Luxury!

It was well over 60% when I was a young grad. Got me a room in a grotty HMO in Peckham, without luxuries like working hot water.

[porca misèria]

11,800 repossessions in the first 6 months of the year. Net out the 1300 BtLs, and you have 10,500 residential repossessions. Annualised that is 21,000 'strivers'/'hard-working families' out on their ear. What level of repossession is required for the MSM to start reporting on it as an issue?

It's only when we see regular articles in the MSM about VV's (Venger's Victims), will we enter the 'fear phase'.

That's 5400 repos of which 1300 BTLs. Annualised you get 8200 non-BTL repos, some of which may look more like vanishing fraudsters than hard-working families.

[spyguy]

Oh it's the resolution foundation again

Yep. Resolution foundation is stuffed with Gordon Brown Yes Men, trying to re-write history. That odious one eyed ***** is still trying to control everything.

[winkie]

Sympathy...until I saw the words 'in London'

Make housing cheaper there, more people will move there, such is the size of the commuter belt.

The wages need to go up. Or people need to move out of London and stimulate other areas.

London is one of the cheapest places to live if no rent or mortgage to pay........the people making the most from housing benefits are the people holding the housing along with the lenders that lend to buy the housing.

[bomberbrown]

Need to amend title - working poor forced to spend half their income on housing because of the policies of every ruling party since 1979.

That really is a damning chart, there's no doubt. Could it also be explained by the technological revolution of the almost last 40 years?

[mrhappy]

That really is a damning chart, there's no doubt. Could it also be explained by the technological revolution of the almost last 40 years?

The green line seems to start leveling off around 71' to me, about the time the Bretton woods system came to an end.

[Habeas Domus]

"of those homes, 1,300 properties, were on buy-to-let mortgages,"

Thats not the same as being a BTL, there could be a bunch of BTLers in there with normal mortgages obtained back in the glory days.

[@contradevian]

I guess that is one reason why the non working socially housed are blessed....depending on how you calculate their housing costs it is really zero % if you net out housing benefit. That still leaves little to live off for those of working age, but a rather comfortable position for the retired with minimum income guarantee and even disability enhancements over and above the netted out rent.

Can't say I blame them. Its getting to a stage now where someone on who is on NMW - a third of their wage will go on social rent, and nearly half once you have factored in lowest band Council tax. Slowly and surely, rentierism is destroying the incentive to do actual work and at both ends of the scale.

[campervanman]

Need to amend title - working poor forced to spend half their income on housing because of the policies of every ruling party since 1979.

Now can anyone spot the link between your chart and the one on my signature?

[byron78]

The wages need to go up. Or people need to move out of London and stimulate other areas.

Probably the 2nd one.

Higher wages would just = landlords upping rent.

It's the same most places. LL set rents at the max anyone can afford to pay.

Lower wage areas obviously often have lower rents, and vice versa.

I know so many folk in London on excellent money who are worse off than minimum wage folks on 12K a year in Wales.

[irrationalactor]

We need an end to rentierism and decent, affordable housing. Rebalancing the economy away from London - with it's crazy crazy rents - would be great but I don't see it happening. If it ever did happen rents in other parts of the country would just increase; they won't let the 'rebalancing' go both ways.

If you're a 'young professional' in this country you have a choice between:

• Living in London and building a career, with some confidence that you can find another job should your current company run into problems. Job security is a thing of the past, so you need options. The majority of other people in your situation have done this, so the social and dating scene is also centred on London.
• Moving to a new 'secondary' city every five years as you chase jobs across the country. Outside London, transport links are awful, so there is no other 'hub' where there are many good options for work within commuting distance. You're forced to bank everything on your company staying afloat, or be willing to move at the drop of a hat.

Either way you'll likely be renting, either because you can't pay London prices or because you need to be able to move to chase work, with the BTL landlord skimming off as much as they can possibly get away with.

If you're lucky enough to find a partner then you can share risks, allowing one or the other of you to be out of work for a while. If you're single, you not only need a job but you need a large pool of other singletons (or to resign yourself to bachelorhood/spinsterhood). After University is over, that means the south-east.

[durhamborn]

Can't say I blame them. Its getting to a stage now where someone on who is on NMW - a third of their wage will go on social rent, and nearly half once you have factored in lowest band Council tax. Slowly and surely, rentierism is destroying the incentive to do actual work and at both ends of the scale.

Agreed.When i was a councillor a long time ago it was always noted that our social homes needed to cost around 25% of household income including rates.If it went over that we would have a problem.Back then however the welfare net was much smaller.Thats the problem.ALMOs and HAs now dont care how much working people suffer.They simply whack up the rent every year knowing most is paid by housing benefit.They now answer to nobody and are set up to pay massive wages and pensions to their staff.

Its telling how much they rely on housing benefit as out local one is having to advertise 3 bed houses available.Thats because a lot less on benefits want 3 beds due to the bedroom tax cut.Working people in the north east cant afford "social" homes to rent.Better to buy a cheap terrace for £40k.

[EmmaRoid #FBPE#JC4PM#GTTO]

We need an end to rentierism and decent, affordable housing. Rebalancing the economy away from London - with it's crazy crazy rents - would be great but I don't see it happening. If it ever did happen rents in other parts of the country would just increase; they won't let the 'rebalancing' go both ways.

If you're a 'young professional' in this country you have a choice between:

• Living in London and building a career, with some confidence that you can find another job should your current company run into problems. Job security is a thing of the past, so you need options. The majority of other people in your situation have done this, so the social and dating scene is also centred on London.
• Moving to a new 'secondary' city every five years as you chase jobs across the country. Outside London, transport links are awful, so there is no other 'hub' where there are many good options for work within commuting distance. You're forced to bank everything on your company staying afloat, or be willing to move at the drop of a hat.

Either way you'll likely be renting, either because you can't pay London prices or because you need to be able to move to chase work, with the BTL landlord skimming off as much as they can possibly get away with.

If you're lucky enough to find a partner then you can share risks, allowing one or the other of you to be out of work for a while. If you're single, you not only need a job but you need a large pool of other singletons (or to resign yourself to bachelorhood/spinsterhood). After University is over, that means the south-east.

I'm not sure the situation is quite that bad. I take it you are not in the North.

[goldbug9999]

Need to amend title - working poor forced to spend half their income on housing because of the labour party.

You mean "labour" rather then "the labour party" since they ceased to become the latter a long time ago.

[debtlessmanc]

I'm not sure the situation is quite that bad. I take it you are not in the North.

Indeed, my partners software company in Manchester employs 10 25-35 year old software engineer graduates on £30-50k . All of them have bought properties in the city, some are single, some are not. The cities transport is not perfect, but it's okay, certainly the airport is good.

The southeast is ridiculously expensive. Personally, I would leave the uk rather than attempt to live there on anything less than banksters salaries, but then I from the north originally.

[irrationalactor]

I'm not sure the situation is quite that bad. I take it you are not in the North.

It was for me. When I lived in the North I had three companies go bankrupt and make me redundant, two of them in the space of a year and half. Also I'm gay, so the dating thing is more difficult as well. Out of my old circle of friends, the only ones who are still up there are those who had a stable relationship early in life, or the odd one working a non-ideal job in a call centre or similar. Everyone else has had to move south for work.

I don't think that you can deny that economic activity is centred on London and the south-east - look at where the government spends its infrastructure budget. There is a critical mass of companies - many of my current employer's big clients are within walking distance of the office. If we were in Manchester or Birmingham it would be much more difficult to service them.

I'd love to go back, but the odd job opportunity that comes up are scattered all over the country. I would have to be prepared to keep moving to chase the jobs. And not much is comparable to the kind of work I am doing in London.

Possibly I'm too defeatist, but this is what landlords are exploiting. Force people by economic circumstance inside the M25 and jack up the rents. Many people don't have an option but to pay it, if they want to live near their job or their career.