The Thinkhouse Review: diagnosing our housing ills

The IFS paper contains some stark facts that should give us pause. They conclude that “housing costs are a first order issue for poverty”. Despite rising mortgage rates, renters face higher housing costs than owners and struggle with lower-income standards in terms of higher rates of food insecurity or material deprivation. It reports that poverty rates are nearly half (46%) for all social tenants, a third (34%) for all private tenants, but just an eighth (12%) for owner-occupiers

Most of the focus is on the private rented sector (PRS) and three points stand out:

• The relatively low quality of PRS homes for low-income renters (25% of homes would fail the Decent Homes Standard, compared with 18% in owner-occupation and 12% in social renting).

• The refreezing of the Local Housing Allowance (LHA) has reduced the proportion of (Zoopla) advertised lets that would allow the LHA to cover rents from 23% to only 5% (2023 Q1).

• A declining share of affordable properties for the PRS is associated with poorer-quality outcomes for lower-income private tenants. The authors find poorer Energy Performance Certificate ratings and higher heating and hot water costs for affordable PRS properties in 2023 Q1. They are also more likely to be in low-employment neighbourhoods.

The authors conclude that, with the increasing numbers and share of low-income households in the PRS, the case for revisiting the levels of LHA and support for housing costs is warranted. They recognise that this is a political matter, but it is hard for the reader to ignore the mounting evidence.

Preventative approach

Turning to the BRE paper, it builds on earlier work that takes a clear preventative or ‘other savings’ approach – ie by ignoring the costs to society of not improving our poor-quality housing, we spend more in other areas such as the NHS. Looking at data for the next 30 years in England, it finds that 2.4 million (10%) of homes fall below minimum standards for Category 1 in the Housing Health and Safety Rating System.

It finds that it is costing the NHS £1bn a year to treat those suffering from the consequences – often the effect of cold or trip hazards (this is an underestimate as it is only the first-year treatment costs and many may be ongoing).

“By ignoring the costs to society of not improving our poor-quality housing, we spend more in other areas such as the NHS”

The estimated cost of repairs to the 2.4 million homes is £9bn – a nine-year payback period before net savings would start to emerge. Looking at the broader costs and the benefits that over 30 years of preventing all Category 1 hazards would generate, in today’s prices, a societal saving of £136bn (£13bn of which would be for the NHS).

Taking the recent estimate that there are 60,000 homes in England with Category 1 damp and mould, it is estimated that this would cost £250m to fix, but that the benefits to society of doing so would be worth £4.8bn on today’s prices over the next 30 years.

These studies provide ammunition to support campaigns about improving and investing in better housing outcomes. They also provide approaches that are couched as appraisal or economic impact evidence that can be well placed to convince budget holders and politicians why housing should be a priority.

Professor Ken Gibb, professor in housing economics, University of Glasgow; and director, UK Collaborative Centre for Housing Evidence