Housing costs — Who pays, and who benefits?
Households in England have endured increasing housing costs in recent years. Who is paying for this, and who is benefiting?
What is the housing situation of households in England?
As shown in Figure 1, almost two-thirds of households in England are owner occupiers, with the majority of these having paid off any mortgage used to purchase the property.
The next largest group of households live in housing rented from private landlords, with one-quarter of those relying upon Housing Benefit to help them meet the full cost.
The final group of households live in subsidised Affordable Housing, with most of them also relying on Housing Benefit to meet the full cost.
In total, 14.8% of households rely upon Housing Benefit to meet their housing costs.
Figure 1 — Housing situation of households in England
What does it cost to live in housing in England?
For the purposes of this analysis, ‘housing costs’ exclude Council Tax, utilities bills, insurance, and maintenance.
On this basis, owner occupiers without a mortgage have a housing cost of zero. For those owner occupiers with a mortgage, the average repayment is £598 per calendar month (pcm).
The average private rent is £852pcm. For those households in receipt of Housing Benefit, the average payment is £481pcm — with the household paying the remaining 44%.
The average Affordable Housing rent is £407pcm. For those households in receipt of Housing Benefit, the average payment is £351pcm — with the household paying the remaining 14%.
Figure 2 — Average housing cost per individual household in England
Who pays for housing costs in England?
If the housing situations from Figure 1 are cross-references with the costs per individual household from Figure 2, the total estimated housing cost for England is £9.4bn pcm (£112.9bn per annum).
The vast majority of this cost (86%) is estimated to be met from households’ own income / wealth, with the remaining amount (14%) being met from the public purse.
Figure 3 —Payers of housing costs in England
Who benefits from housing costs in England?
Private landlords receive an estimated two-fifths of housing costs in England, despite only one-fifth of households renting from private landlords. An estimated 39% of Housing Benefit is paid to private landlords.
Mortgage lenders receive an estimated 13% of housing costs, from the interest paid on mortgages by 29.0% of households. The remaining portion of mortgage repayments contribute to the household’s personal wealth, totaling 29% of housing costs.
Registered Providers of Affordable Housing receive an estimated 17% of housing costs, to pay for the 17.2% of households living in Affordable Housing.
Figure 4 — Beneficiaries of housing costs in England
Notes and assumptions
- The big limitation of this analysis is that average private and Affordable Housing rent is assumed to be the same irrespective of whether or not households are receiving Housing Benefit (although, I am reassured that my estimate of Housing Benefit paid to private landlords is consistent with reported data). I would welcome contributions from anybody who has more fine grained data.
- All accommodation costs exclude Council Tax, utilities, insurance and maintenance
- Affordable Housing assumes Social Rent and Affordable Rent; Shared Ownership excluded
- Assumes all mortgages repay capital and interest monthly (no interest only mortgages)
- Beneficiaries of mortgage repayments calculation assumes 2.75% interest over 28 year term
- Public sector cost for affordable housing excludes subsidies / guarantees to enable the delivery of additional affordable housing
- Public sector cost for Affordable Housing excludes subsidies / guarantees to enable low income households to buy a home
- Personal wealth does not account for equivalent savings for owner occupiers with no mortgage
- Registered Providers includes both local authorities and Private Registered Providers
Sources
- DCLG (2017) 2015–16 English Housing Survey Headline Report
- VOA (2017) Private Rental Market Statistics 2016/17
- DWP (2017) Family Resources Survey 2015/16
