Rapidly rising prices and years of restrictions on benefits will inevitably lead to more intense poverty for low-income households, says Victoria Winckler, but housing providers can still step in and help.
The rapid increase in the cost of living is, by now, hardly news. The rising costs of energy, fuel and food are all too evident in our everyday lives as well as in the inflation statistics. And if we’re feeling the pain now there is worse to come. The Bank of England initially forecast that inflation would rise to 7 per cent in spring 2022, but it now expects inflation to hit 8 per cent by Spring with the possibility of even higher increases later this year. Any respite is a long way away – the Bank expects that inflation will take several years to ‘fall back’.
The increase in prices is made all the worse by the failure of household incomes to keep pace. Few if any workers have enjoyed pay rises that match inflation, and they’re also hit by rises in National Insurance contributions. Some benefits such as Universal Credit and state pensions have gone up but the increase is less than half the rise in prices. Even worse, many other elements of the social security system, most importantly the benefit cap and the level of Local Housing Allowance, have been frozen.
The combined effect of rising prices and lagging incomes is a sizeable real-terms cut in people’s spending power. The Resolution Foundation forecasts that the typical working-age household faces an income fall of 4 per cent, or £1,100, in 2022-23. That’s tough for everyone. But the biggest hit is to the incomes of the least well-off, with the poorest quarter of households facing a fall in income of six per cent.
These forecasts come on top of decreases in the incomes of the poorest households over the last ten years, driven by reforms to and freezing of social security benefits and regressive tweaks to tax and national insurance. Add to that, many low-income households saw their incomes fall during the pandemic as a result of losing their livelihood or being furloughed on 80 per cent pay.
Where does that leave people in Wales?
Most obviously, more people are worse off. Just how many people have been pushed into poverty is simply unknown as the usual source of poverty statistics, the Households Below Average Incomes dataset, is so unreliable for 2020/21 that the Welsh Government advises against using it.
It’s not just about numbers – the long-term effects of falling incomes are also pushing people into very much deeper poverty than before. In the past, having a relative low income meant that households had much less to live on than the norm but could often still ‘get by’. But the cumulative effect of benefit cuts and inflation have driven incomes down so far that households are now without essentials – things like food, heating, toiletries, clothing and a secure home.
Even in November 2021, before inflation really took off, the Bevan Foundation’s YouGov survey on living costs found that nearly four in ten Welsh households did not have enough money to buy anything beyond everyday items. Alarmingly, we found that more than one in five families with children were cutting back on items for children including books, toys, nappies and clothing, whilst one in ten families with two or more children had to cut back on food for children.
Credit must be given to the Welsh Government for their responses to date. The introduction of free school meals for all primary school children, after several years of campaigning by the Bevan Foundation, cannot come soon enough. The Winter Fuel Support scheme, giving eligible households £200, was welcome as is its extension to households in receipt of Pension Credit – another Bevan Foundation win. Welcome also is the extension of payments of PDG-Access to pupils from low-income households in all school years along with a significant increase in its value – both argued for by the Bevan Foundation. Add to this payments to carers, both unpaid and paid, the Council Tax payment of £150 to all those in Bands A-D properties, the continuation of flexibility in the Discretionary Assistance Fund plus the promise of another round of Winter Fuel scheme in autumn 2022, and we have what must surely be the most generous package cash payments to low-income households ever made by the Welsh Government.
Welcome though it is, there are regrettably limits to the Welsh Government’s approach. There is a plethora of different payments, announced at different times, with varying eligibility criteria. And with every different scheme, there is a risk of households missing out simply because they did not know they could apply or thought they already had. For example, take-up of the Winter Fuel payment stood at around 35% in early February although may have increased since then.
For all their merit, the various schemes are one-off sticking plasters that do not – and cannot – address the fundamental problem that the current system of benefits is inadequate for meeting people’s long-term needs. Like all of us, low-income households need financial security to plan and manage their lives not surprise, ad hoc payments.
So what does the rising cost of living mean for housing? In the most immediate sense it means that more tenants and residents will be struggling to afford to live in their homes. It’s not difficult to imagine that arrears will rise and that the number of evictions for rent or mortgage arrears will grow. Landlords and mortgagors will face some tough decisions about their arrears and evictions policies in the coming months.
There are also implications for repairs and maintenance. Tenants and residents may not have enough disposable income to keep their home in good order, whether it’s keeping it warm enough to avoid condensation and mould, being able to redecorate or managing a garden. We already know that many social housing tenants cannot afford flooring or window coverings, and that growing numbers cannot afford essential items such as beds, bedding or white goods. Landlords may want to think about how they let a home that can be lived in when tenants have no disposable income for furniture and furnishings.
Many social landlords take a wider view of tenants’ wellbeing and offer services such as benefit checks, food boxes, low-cost furniture and recycled paint for decorating. Those that do will, I predict, see demand soar. Those that don’t will need to start providing a broader package of tenant support if they want to help tenants to avoid severe hardship.
The implications go beyond the individual tenant and their home – there are important consequences for the wider housing system too. Tenants are already struggling to afford rents in the private sector, with the vast majority of rents for new tenancies being above Local Housing Allowance. Social rents risk becoming unaffordable especially for tenants who pay some or all of their rent from their wages. For owner-occupiers, most experts expect price rises to slow (but not go into reverse) while mortgage rates are expected to rise, putting pressure on marginal home owners.
With a squeeze across the system, we can expect homelessness to increase sharply while options for people without decent accommodation shrink.
The outlook is incredibly challenging and is a long way from the promises of ‘building back better’. Despite this, there is much that housing providers of all kinds can to ease the squeeze on hard-pressed households. A decent, warm home should be a right for everyone.
Victoria Winckler is director of the Bevan Foundation, an independent charity that finds solutions to poverty and inequality.
This is an article from the Spring 2022 issue of WHQ. To find out more about the issue, go here. To find out more about subscribing, go here.