Home Truths: the housing challenge facing low to middle income Britain

Vidhya AlakesonResolution Foundation

www.resolutionfoundation.org@resfoundation

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• On low-to-middle incomes who are largely independent of state support

• Face unique – and often overlooked – challenges because too rich, too poor

Low-to-middle income households……………………………………………………………………………………………………..

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Total after-tax household income

£12.6k

£21.0k

£45.1k

£0k £10k £20k £30k £40k £50k £60k £70k

Benefit-reliant

Low tomiddleincome

Higherincome

……………………………………………………………………………………………………..Household income

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Homeownership is still the predominant tenure……………………………………………………………………………………………………..

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But the picture looks very different for under 35s……………………………………………………………………………………………………..

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What does a typical household spend on housing?

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Low to middle income households

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……………………………………………………………………………………………………..But 1.3 million face unaffordable housing costs

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• 590,000 are private renters• 585,000 are owners with a mortgage• 100,000 are social renters• A disproportionate number, 570,000, are 

younger families - where the head of the household is under 35

• Two thirds are outside London and the South East

Who are these households?

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Peter and Sue

Net household income: £25,859 

……………………………………………………………………………………………………..A closer look at affordability for a typical family

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……………………………………………………………………………………………………..Islington

Two bed, lower quartile property

Rent: £1630

Capital value: £340,000

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……………………………………………………………………………………………………..Guildford

Two bed, lower quartile property

Rent: £950

Capital value: £209,250

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……………………………………………………………………………………………………..Coventry

Two bed, lower quartile property

Rent: £498

Capital value: £83,000

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……………………………………………………………………………………………………..Doncaster

Two bed, lower quartile property

Rent: £410

Capital value: £65,750

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……………………………………………………………………………………………………..How do things look for a low income family?

Cost to service a mortgage (% net income)

23%

Cost to rent (% net income) 33%

Cost of 25% shared ownership (% net income)

16% Two bed, lower quartile property

Rent: £498

Capital value: £83,000

John and Sarah

Net household income: £18,076

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……………………………………………………………………………………………………..A word on housing benefit

• Low income families with high rents may be eligible for HB to help with costs

• But low to middle income group does not closely match HB recipients:

• 74% of existing HB claimants are out of work (although growing number of working households coming onto HB) – Majority of low to middle income group has one person in 

work• 65% of claimants are in social housing– Low to middle income group increasingly not eligible for 

social housing 

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Private rent is increasingly the least affordable tenure in all areas

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……………………………………………………………………………………………………..But for younger households, it is often the only option

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……………………………………………………………………………………………………..Conclusions

• Low to middle income households are at the sharp end of the housing crisis 

• Younger households in the group, in particular, have few options outside the private rented sector

• Private rent is now more expensive on an ongoing basis than any other tenure

• And this is no longer only a London and South East problem. High rents can be found in all parts of the country. 

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 Home Truths: the scale of Britain’s housing crisis and how to fix it

Vidhya AlakesonRichard DonnellNatalie Elphicke

Keith ExfordCampbell Robb

Jules Birch

@resfoundation

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