New research was published by Shelter this week revealing that approximately 1 million people – 2% of the adult population, have taken out at least one payday loan to help pay their mortgages or rent this year. Approximately 7 million (15%) have taken on debt of one form or another for this purpose. There is clearly a crisis in housing affordability.
With inflation rising and wages stagnating, the difficulties such households face isnt going to get better any time soon. Added into this mix is the effects of the Housing Benefit changes. From April this year, caps were put in place on the maximum weekly HB that could be claimed for all new claimants as well as limiting HB claims to that of the 30th decile of rents in an area. A transitional period of up to nine months was given to those who were living in accommodation above these rates. This transitional period runs out at the end this month. Additionally from this month onwards single claimants under 35 can no longer claim for a single bedroom property, only a room in shared accommodation.
The Chartered Institute of Housing has found that there will be a national shortage of 800,000 homes available, which meet the criteria to be funded, giving those dependent on such benefit a stark choice between giving up their home and cutting back on other essentials to make up the shortfall. This is likely to lead to a number of unforseen consequences.
Firstly, for those who scrimp and save to hang onto their homes, any further sacrifice in their already meagre incomes are going to cut into spending on essential items such as heating and food. With fuel poverty already at record levels and demand for emergency food parcels provided by charities soaring, such cutbacks would add further strain, impacting on health and wellbeing putting further pressure on an NHS which is being rapidly dismantled. Those who chose to give up their homes and chase the dwindling supply of “affordable accommodation” for which benefit will be paid, they have little power of negotiation. With demand for such properties outstripping supply in almost all areas, they are in a remarkably powerless position to negotiate repairs or maintainance from landlords.
Landlords too will feel the effects. For the last decade property has been promoted as an alternative investment vehicle. A solid dependable low risk method of saving for retirement. Demand dropping for properties above the 30% threshold and/or the caps are likely to see such properties either become void for longer than anticipated, possibly encouraging landlords to drop rents to below a mortgage sustainable rate. Repossessions of such properties are all but inevitable, which could see tenants – both private and housing benefit funded – chucked out on their ears with a barely a moments notice as the banks take possession.
This will have wider consequences across the entire housing market. Should repossessionsof rental properties rise, house prices will fall, expanding the effect of the changes to the owner-occupier sector. Those struggling with mortgages will be trapped by negative equity – unable to sell their homes at a value which covers their mortgages in order to downsize to one which they can afford. Trapped between a rock and a hard place, defaults and repossessions will follow.
These changes have the makings of a perfect storm. One which makes Cyclone Bampot look like a wee swirl in a teacup. Families uprooted; communities disempowered and ever larger waves threatening to engulf whole sectors of society.