Rent affordability in the affordable housing sector: literature review

1. Introduction

1.1 Purpose of review

Rent affordability is an important aspect of several long-term Scottish Government strategies. The Tackling Child Poverty Delivery Plan: Every Child, Every Chance (ECEC) includes a set of actions to make progress on the three main drivers of child poverty - income from work and earnings, costs of living and income from social security. As rent is a substantial component of costs of living, there are two specific actions mentioned in the child poverty delivery plan 2018-2022^[1]: ‘to ensure that future affordable housing supply decisions support our objective to achieve a real and sustained impact on child poverty’ and ‘to work with the social housing sector in 2018 to agree the best ways to keep rents affordable’ (Scottish Government 2018). Stakeholder engagement on Housing Beyond 2021 is also underway (at the time of writing), focused on developing a vision for how our homes and communities should look and feel in 2040 and the options and choices to get there. The approach to housing supply beyond 2021 will need to consider affordability across all tenures, as well as the role of social and affordable housing in particular. Housing improvement programmes, such as Fire and Smoke Alarms changes and the Energy Efficiency Standard for Social Housing post-2020 (EESSH2), require investment from social sector landlords, which could have a knock-on impact for rent levels (but usually with reductions to energy costs in the latter case). Finally, as part of work on Fuel Poverty, the Scottish Government is proposing a new definition which has two parts. Firstly, whether households would be required to spend 10% or more of their income, after housing costs, on required fuel bill spend. Secondly, whether the household residual income, after deducting housing, fuel and any (paid) childcare costs is sufficient to maintain an acceptable standard of living, when compared to the corresponding Minimum Income Standard (MIS). This means that more affordable rents may lead to higher residual incomes for households, which in some cases may be sufficient to lift them out of fuel poverty.

This literature and evidence review, the first stage of a larger study on rent affordability, aims at enhancing our knowledge and understanding of rent affordability in the affordable sector and its impact on tenants and Registered Social Landlords (RSLs), as well as the role of policies on rent affordability. At the end of this report, we have identified gaps in knowledge. The review is not exhaustive and focuses on the most influential, pertinent or recent (at the time of writing) studies on rent affordability in the affordable sector. The affordable sector is defined here as the sum of social rented and mid-market rented housing.

1.2 Structure of review

The first part of the review focuses on the definition of the term affordability across different studies and institutions (chapter 2). The third chapter concerns the various ways that rent affordability can be measured – the chapter reviews different measures, some more objective and others more subjective. The relationship between housing and poverty across time, household type and housing tenure is then examined in chapter 4. Whether intermediate housing provides an affordable source of housing is discussed in chapter 5, while chapters 6 and 7 present recent evidence on affordable rents across Scotland and the UK and on the changes in rents across time. The final chapter lists policies with an impact on rent affordability across the UK regions. The conclusions of this review include key findings and identify gaps in knowledge.