Redefining affordable housing

Guest blog written by , Communications & Marketing Manager at Generation Rent.

Affordable” is a word that has caused much confusion and anger in housing circles since the old government reformed the grant system for social housing.

To be deemed affordable and thus qualify for state subsidy, new homes must be offered to tenants at a maximum of 80% of local market rents. To call this affordable betrays a staggering lack of awareness. In the real world, 80% is not much cheaper than the expensive rents set by the free market; it is not affordable to people on average incomes in expensive areas, let alone those on low incomes whom subsidised housing is supposed to prioritise.

So when government MPs pat themselves on the back about rates of affordable housebuilding, they’re not actually talking about homes that are going to help Britain’s neediest.

The possibility of affordable being defined by house prices – subject to the same inflationary effects as rents if not more so – is as bonkers as the government’s policy. It is hard to believe that any politician can credibly define affordability in relation to anything other than wages.

The response from the housing minister, Brandon Lewis, would be amusing if it weren’t so enraging. He said redefinition of affordability could “undermine” the delivery of affordable housing. This is like saying that reclassifying horses as unicorns would be damaging to unicorns.

Ultimately language only goes so far, and any government that wants more homes to be affordable to people on low incomes must use public cash to build them. If we’re to believe the buy-to-let industry, there’s no better investment than property.

social housing

Photo: G Y Gabor

Is room-sharing the new flat-sharing?

Like when you had to share with your sibling. Only now you're an adult and you're paying for the privilege

Like when you had to share with your sibling. Only now you’re an adult and you’re paying for the privilege

Just when you thought sharing a tin-box ‘flat’ with five of your closest friends (and if they weren’t close before, they certainly are now) was the ultimate in low cost living – a new meaning for co-habitation has been defined.

Room sharing. Not with your current squeeze but with a completely platonic friend or (no we’re not joking) a stranger.

The eponymous SpareRoom website that has made renting so much easier for so many, has seen a 71 % increase in searches for bedroom shares over the last two years.

The harsh reality of rising rent prices means that the sanctity of your own space – a room to call one’s own – is being forfeited. Few people would choose to share a room with a complete stranger (hell, squatters get more say in who they lie next to at night) but if young people are able to afford to live in a city that has job prospects, then this may be the only answer.

Roost spoke to Simon Roach, who room shared with friend Louis Reader for nine months, about the reality of sharing a bed with your mate – and paying for the privilege.

Faced with an increase in rent on the three bedroom flat he share in Hackney with two other friends, Roach decided to rent his room out to friend Reader to help with the bills.

“It made sense – paying half the rent for what seemed like a relative inconvenience meant that I could stay living in an area that I liked, in a decent flat and not get into debt,” says Roach.

Roach admits that it was not an ideal situation but it wasn’t intended as a long term solution.

“A lot of my mates were quite surprised when I told them about it – they couldn’t understand how I would be prepared to sacrifice my own bed to stay in a decent area,” says Roach. “But the reality of it wasn’t too bad.”

He would, however, draw the line at sharing with a complete stranger.

“As Louis and I had travelled together we kind of knew each others weird habits, but if it was someone I didn’t know at all – that would be weird.”

What started as a short-term solution, turned into a nine-month love in – and they managed to stay friends at the end of it. Roach got promoted and moved into a different flat up the road in Clapton – with a room all to himself. But for many Londoners, room sharing is still their only option.

With the result of the General Election now cemented, let’s see how another term of empty promises about ‘affordable’ housing will impact on the capital’s renting generation.

How to stop your rent increasing

Guest blog written by John Bibby, a policy officer at ShelterEdited by Thomas Cox. 

There are a wide range of different possible regimes to regulate rent. They differ depending on what the minimum tenancy length is, what restrictions are placed on rent increases within that tenancy and any restrictions on rents at the outset of a tenancy.

Limits on in-contract rent increases are needed for such longer tenancies as renters are otherwise vulnerable to eviction by a rent hike.

Photo credit: Turkeychik via CC 2.0

Photo credit: Turkeychik via CC 2.0

There are a number of proposals already on the table. Shelter has proposed restriction on rent increases within five year tenancies as part of our Stable Rental Contract, and a host of other organisations (and individuals) have also proposed other new regimes.

And then there are England’s current and historical regimes – regimes that have been tried and replaced. I’ve put together a list of the options that I’ve seen being discussed recently as possible regimes for England (at the bottom of this post).

The different regulatory regimes are trying to do different things. Although all of them restrict a landlord’s ability to increase the rent, not all of them are measures to make renting more affordable.

The Stable Rental Contract, for example, was designed primarily to make private renting more stable and secure for families by introducing longer tenancies.

Photo credit: Steve Snodgrass via CC 2.0

Photo credit: Steve Snodgrass via CC 2.0

In contrast, some proposals for rent control are entirely motivated by a desire to generally improve affordability for renters.

Arguably, if they propose big cuts in rent levels, they also put at risk renters’ security of tenure as some landlords will likely try do everything they can to sell-up.

So I’ve also indicated what the stated purpose of the regulation is and given some comments on how likely it is to achieve it. Finally, I’ve also suggested any other possible effects that the measure could cause where they’re significant.

The table is only a guide to the lie of the land in the current debate and plenty more analysis of the pros and cons of each of the options is needed. Importantly, I’m also not going to suggest a way of choosing between them. To an extent that will always depend on what you think the regulation should and shouldn’t be trying to achieve.

Who/what? Detail Stated purpose and effect
Assured Shorthold Tenancy (all English tenancies post-1989) Minimum six month tenancies; rent fixed for minimum of six months (1 year during statutory periodic); rises unrestricted; rent set by market at contract start. Purpose: to create a free market for rents.

Efficacy: this is the existing regulatory regime, so the effect is renting as it exists.

Other effects: renting is expensive, unstable, etc.

Shelter’ Stable Rental Contract Five year tenancies; rent rises limited to inflation in contract; rent set by market at contract start. Purpose: to provide greater security and stability for renters.

Probably efficacy: likely to achieve stability, but limited impact on market rents as the rent ‘resets’ at the end of every five years. Rents more predictable during course of tenancy.

Other potential effects: unlikely to do a lot about the high cost of renting.

Civitas Indefinite tenancies.

Rent rises limited to inflation or wages in contract.

Rent set by the market at contract start.

Purpose: to provide greater security and stability for renters.

Probably efficacy: likely to achieve stability. Over the long-term a gap may open up between rents that can be charged in properties with long-term tenants and those with new as rents do not regularly ‘reset’.

Other potential effects: gap between rents that could be charged may create renting winners (long-term tenants) and losers (new tenants).

Labour Party policy Three year tenancies;Rent rises limited to inflation in contract;Rent set by market at contract start. Purpose: to provide greater security and stability for renters.

Probably efficacy: likely to achieve stability, but limited impact on market rents as the rent ‘resets’ at the end of every three years. Rents more predictable during course of tenancy.

Other potential effects: unlikely to do a lot about the high cost of renting and security less durable than proposed by Stables Rental Contract, for example.

David Lammy MP’s proposal Three year tenancies.

Rent rises limited to 20% increase over three years.

Rent limited to 20% above market rate at contract start.

Purpose: to provide greater security and stability for renters and place constraints on market rents.

Other potential effects: question over whether a 20 per cent limit on increases would achieve stability as this is a much bigger increase than many families would be able to bear in a single year. Arguably limited impact on market rents as few properties let out at 20% above market rent.

Arguments against: questions over efficacy.

Generation Rent 50% surcharge on all rents charged above a level based on local council tax. Purpose: to cap rents and make renting affordable. And to raise money for investment in affordable homes.

Other potential effects: unlikely to make renting more affordable as will act more like a tax on rent income. Could even increase some rents as some landlords struggle to meet costs. However, could be effective in raising more money for affordable housing investment.

Arguments against: lack of efficacy in principle aim and potential perverse impact. Cut in rental yields may make landlords try to sell-up and leave the rental market.

38 degrees petition (created by Becky Ely) Caps on amount that can be charged for any private rented home (£75 for a room in a shared house, £95 for a studio, £120 for a one bed property, etc.) Purpose: to cap rents and make renting affordable (in London).

Probably efficacy: likely to achieve aim within regulated market, however may lead to an increase in the black market and hidden charges (service charges etc.). Likely to have other potential significant drawbacks.

Other potential effects: this would imply a significant cut in rent for most parts of the capital where the cap is proposed. Landlords would likely try to leave market, which would have short-term implication for existing renters. Potential implications for investment in existing stock over the long-term.

Fair rent regime (England for all tenancies 1977-1989) Indefinite tenancies

Chargeable rent limited by the amount assessed as a fair rent for a similar property in the same area.

Purpose: to remove impact of scarcity of rental properties by limiting the amount that could be charged for properties to ‘fair’ levels (which assumed no shortage).

Probably efficacy: rents limited below market rents.

Other potential effects: similar to those used against absolute caps. Current existing stock still subject to fair rent regime creates renting winners and losers. Said to have contributed to the decline in the numbers of rental homes and investment in stock.

Rent freeze (England during WW1 and WW2) Emergency measure. Chargeable rents limited to their current levels. Purpose: to prevent rapid rent inflation at a time of war.

Probably efficacy: over time rents are held below what is judged to be the ‘equilibrium level’

Other potential effects: similar to those used against absolute caps, but impact takes longer to be felt as rent take longer to move to below what would otherwise be the market level.

Spotlight: Three long term renting cities – and why they work

1. B-E-R-L-I-N

Every day is a festival when rent is this cheap

Every day is a festival when rent is this cheap

In Germany’s capital of cool, the tenant’s rights are top priority. Rents are regulated and people have secure tenancies, and because the situation is so amenable to the tenant, around 60 per cent of Germans rent rather than buy. That the voter bloc is made up of more than half of renters means that politicians are more likely to cater to their needs – putting rent regulation high on the agenda.

How does it work?

Germany has more liberal planning restrictions than in the UK, which means that supply for housing isn’t as constrained. Berlin also operate a rent control system and so rents remain low across the board.

So what kind of price are we talking?

You could get a one bedroom apartment for about €600 a month for a central location, and a three-bed in the centre would be around €1,300.

Should we move there?

Yes, go now. Seriously, get on the next plane – before the rest of Britain clocks onto the benefits of this renter’s haven

2. M-O-N-A-C-O

Ok, we get it. It's a veritable paradise.

Ok, we get it. It’s a veritable paradise.

Monaco is unique for many reasons – there aren’t many countries whose taxes are funded exclusively by casinos. But the property market is just as bizarre: it is made up almost entirely of rentals, almost entirely owned and managed by one family – the Pastors – who have been running the show since the 1920s. The selection process to gain a tenancy in one of their properties is rigorous to say the least – unless you are well connected (ie related to royalty or own a shipping conglomerate) then it is unlikely you will even be considered.

How does it work?

It works for the residents because they are generally super-rich and can afford the astronomical prices. Once you’re in, you get what you pay for – the Pastor apartments are immaculately maintained and at least you won’t be paying through the nose for some hovel in Epping Forest.

So what kind of price are we talking?

You could get a studio for around €4,500 pm but if you want something with a bit more space we’re talking upwards of €13,000 pm.

Should we move there?

If you’re sitting on a fat inheritance then get thee to the Cote D’Azur, otherwise, you’re better off being ripped off for rent in Britain – at least we have a sense of humour.

3. N-E-W–Y-O-R-K

 You may live in a broom cupboard. But it's a broom cupboard in Greenwich Village, okay?

You may live in a broom cupboard. But it’s a broom cupboard in Greenwich Village, okay?

The Big Apples’s rental situation is complex. There is certainly a culture of renting but it is not regulated as comprehensively as it is in Berlin. On the island there is a premium on space, but if you spread your wings to Brooklyn or Queens then the prices aren’t as astronomically high. Like London, it’s a city of dreams – veritable gold pavements and all that – and so people are willing to pay through the nose to live there. After San Francisco, it is the most expensive city to rent in in the whole of America.

How does it work?

Because there is a mixture of rent-control and non-rent control apartments it completely skews the average prices. There are lots of cheap rentals in New York but you’re unlikely to be able to get your hands on them, because if they’re rent controlled and the tenants will be clinging onto them until the day they die.

So what kind of price are we talking?

Obviously it varies from borough to borough, but the average one bedroom is around $3,000 pm (£1957.60) and a two bedroom will set you back another $1,000. And the price keeps on rising – to put it in perspective the average rent for a one bed in 2012 was $2,100 pm.

Should we move there?

If you live (or have lived) in London in the last 10 years, then you already know what to expect: ie very little for a lot. But if you buy into lifestyle and location rather than having say, windows in your apartment, then NY will be your kinda place.

A guide to the average cost of living in each London borough

We all know living in London is expensive and the prices seem to go up and up – it was recently reported that paying rent in the capital can take two thirds of tenant’s incomes. But if you love the city you’ve got to live there. So Roost have drawn up a map showing you the average weekly room rents in each London borough, to help you find the best place to live.

 

Yellow pins: under £100
Red pins: between £100 – £150
Pink pins: between £150 – £200
Green pins: over £200

Source: london.gov.uk