The housing affordability problem is much worse in the south-east of England because higher pay levels are far outweighed by higher rents. Median monthly rent for a two-bedroom home in London in 2010–11 was £1,360, equivalent to 60% of the median take-home pay; in Oxford it was 55%. Even in some poorer towns the problem was worse than the average because local pay was so low: in Blackpool 42%, of take-home pay was needed. Private-sector rents in London were already rising much faster than incomes by 2011: in outer London they rose three times faster in that year. Over a quarter of London’s population were renting from private landlords in 2013, up from 14% in 1991, so the problem was affecting more and more households. Perhaps it might be thought that the problem was mainly confined to households where there was only one worker who had low educational qualifications and was unskilled. But in the aftermath of the global financial crisis of 2008, incomes fell in real terms for most people, including key workers with professional qualifications: for example, they fell in 2011 by 1% for nurses and teachers. Being skilled and having two workers was not proof against the housing affordability dilemma in London. Using the 35% of net income cut-off, a net household income of over £40,000 (equivalent to £50,400 in gross wages) was necessary to rent a two-bed home in half of London’s 32 boroughs in 2011. This would have been unaffordable for a two-earner family consisting of a full-time prison officer and a part-time teacher.
The impossibility of affording private-sector housing for the millions in the UK on much less than median incomes was obvious from these data. In 2011 there were 6 million people who earned within a pound of the minimum wage (£6.19 per hour in UK for adults at the time). Full-time workers on the minimum wage had annual net earnings of £10,740 (£825 per month). Even if it all went on housing, it would not have covered the median rent in 28 out of 32 London boroughs or in nearly a fifth of England’s local authorities. Even for a family with two full-time workers on minimum wages, in those localities the median rent for a two-bed home would have taken up over half of their budget.
Five years later, the housing dilemma had worsened. Figure 2.2 illustrates the situation, showing the proportion of net income required to pay for different types of rental housing in England overall, or in London, in 2016. The graph uses UK Office for National Statistics (ONS) data on housing affordability across England and median net monthly pay combined with calculations for net monthly pay for full-time workers on the minimum wage. The ONS uses the normal 30% of net pay on housing as the affordability level and calculates the ‘gap’ between that and market rents. This gives a monthly rent of £550 for those at the mid-point (median) of wage distribution (point A on the graph). For a two-bed rented home – the minimum ‘decent’ standard for a family with one child (or two of the same sex) and the largest type of accommodation for which data were provided – the average UK rent was £760, so the gap was £210. Evidently the problem is far greater for those lower down the income scales: for every percentage point on the income distribution scale they fall below the median, the larger the gap. For full-time workers on or near minimum pay rates, the gap is huge at about £410, nearly double that for those on median pay. They would have to pay two-thirds of their net pay in rent (point B).18 Even some better-paid workers above the median pay rate would also find housing unaffordable. The scale of the housing crisis and the contemporary housing dilemma in the UK is thus exemplified – by far the majority of working people are affected. Yet even this underplays the problem because the housing dilemma under examination in this book is mainly about the issue in large cities where rents may be above the average. In Manchester, the gap for a worker on median pay was about the UK average at £221.23. However, in London the average rent for a two-bed flat was £1,658, which exceeded the total net income of a worker on the so-called National Living Wage in 2017 by about 50%. Even for those on median pay, the ‘gap’ between this and an affordable rent was £1,057. And while, for obvious reasons, the unaffordability of private rental housing is most acute in the centre of the city, the general problem exists across it: average rents exceeded total minimum monthly net pay in 30 of London’s 33 local government areas (32 boroughs plus the City of London). In 16 boroughs the same was true for average rents for a one-bed flat, and in the remaining boroughs a worker on minimum pay would have to pay upwards of about 80% of their net income. Average rent for one room in a shared house was £607 – 53% of the net minimum pay income – ranging from £813 in the most expensive area to £460 in the cheapest. Of course, a one-bed flat, let alone one room, is below ‘decent’ standards for a family with children.
Figure 2.2 Typical wages and average rents in England and London in 2016: the housing dilemma illustrated
There is an additional housing cost that needs to be factored in to these equations in some parts of the world. Although there are obvious exceptions, particularly for cities at high altitudes, very generally speaking the societies of the GN are colder than those of the GS. This does mean that the issue of keeping houses warm becomes more crucial – it is another facet of poverty. In the UK, the housing affordability issue is compounded when energy bills are factored in. These averaged £1,356 per year per UK household in 2012. Research using average rents and energy costs in England in 2012 found that these totalled £10,248 per year. A minimum-wage worker would be unlikely to live in the average home, but, if they did, it was calculated that for that year their ‘disposable’ income to cover necessities such as food, clothes, transport and council tax would have been less than £1.50 per day. That would have been impossible.19
Similarly impossible situations face low-paid workers in the USA. The National Low Income Housing Coalition there found that, in 2017, ‘there is not a single county or metropolitan area in which a [full-time] minimum-wage worker can afford a modest two-bedroom home, which the federal government defines as paying less than 30% of a household’s income for rent and utilities. And in only 12 counties [mainly rural ones in the West] in the country is a modest one-bedroom home affordable.’20
Because data on incomes and housing costs in rich countries are often better and more available, it is actually easier to demonstrate the housing affordability dilemma there. Nonetheless, playing the devil’s advocate, let us think about the arguments that might be put forward against the analysis of the UK or US in the paragraphs above. It might be said that costing in extra bedrooms for families with children is too generous: why cannot everyone sleep in the same room or, less drastically, why cannot children, or even adolescents of the same sex, share a bedroom? Or why is there any discussion about the mismatch between incomes and rents for a one-worker multi-person household, or a family with a full-time and a part-time worker? If families want shelter,