Hundreds of thousands of low-income households in Britain are facing a living standards crisis that by 2020 will see them struggling to meet a £100-a-month shortfall between rents and housing benefit payments, according to the Fabian Society.
Many private tenants could become homeless if they cannot find the money to meet the shortfall, while others will be forced to turn to food banks or “black market” cash-in-hand jobs to make ends meet, says the leftwing thinktank.
The crisis will become more acute after 2020 unless ministers raise housing benefit levels, it says. By 2025, nearly a quarter of households will rent privately and many working families will be unable to afford market rents without help from benefits.
The monthly gap between rent and housing benefit limits on a privately rented two-bedroom home in a mid-range housing market, currently £35, will rise to £108 in 2020, the report says. Unless benefit levels rise, the shortfall will rise to £283 by 2030.
The shortfall on a two-bed home in a more expensive rental area, currently £68 a month, would increase to £187 by 2020 and £475 by 2030.
Levels of housing benefit, known as local housing allowance (LHA), were frozen for four years in April as part of a raft of cuts announced by the then chancellor, George Osborne, to reduce welfare spending.
Rents are currently going up by about 2.5% a year. “The rising cost of rented housing could turn out to be the greatest social challenge of the 2020s,” said Andrew Harrop, the report author and Fabian Society general secretary. “If rents rise faster than inflation, on current plans housing benefit will come nowhere near to meeting the costs of a modest home.”
He added: “For the next few years, as the housing benefit shortfall grows, people are likely to make ends meet by giving up on other essentials or by trading down into overcrowded, unfit housing. But sooner or later, something will have to give.
“After 2020, either housing benefit for private tenants must be made significantly more generous, or large numbers of people will become homeless.”
A spokesman for the Department for Work and Pensions defended the freeze, saying: “The reality is the housing benefit bill has been spiralling for decades. Since then, we have had to take difficult decisions to stabilise our economy and build a welfare system that works for those who use it as well as those who pay for it.”
He said that some savings from the LHA freeze would be used to create more targeted financial support in areas where rent increases were causing a shortage of affordable accommodation.
About 1.5m households currently receive housing benefit, with working families the fastest growing cohort of claimants. Although the biggest LHA shortfalls have been felt most acutely in high rent areas such as London, the freeze is likely to increase the shortfall in places such as Manchester, Birmingham and Bristol.
Although the Fabian Society research says rent inflation predictions are uncertain, it is likely that there will be significant shortfalls between benefit and rents over the next few years, assuming that rents stay in line with earnings projections generated before the vote to leave the EU.
Campbell Robb, the chief executive of the housing charity Shelter, which supported the research, said: “Even in these uncertain times, we can’t escape the simple fact that if the gap between expensive private rents and housing benefit continues to grow, thousands more families could be tipped into homelessness.”
The Fabian Society research on rents and benefit levels is contained in a wider report on social security, expected to be published next week.