How affordable is affordable housing?

25th October 2016

Ground-breaking research into affordable housing has revealed that almost a third of tenants at a prominent housing group are at risk of not being able to afford their rent.

Flagship Housing Group, which manages and maintains 22,000 homes across the East of England, worked in partnership with Sheffield Hallam University's Centre for Regional Economic and Social Research (CRESR) to commission the research which looked into the financial position of Flagship's tenants and the affordability of its housing products. This research, compared to traditional measures, delved deeper into what customers think about the affordability of their rent and how they manage all of their finances not just their rent. CRESR contacted Flagship's 20,000 tenants, which included social rent, affordable rent, market rent and shared ownership customers. More than 2,500 valid survey responses were received. The research highlighted that 32% of tenants were at risk of unaffordable rent which means any change to their financial circumstances, such as further welfare reforms, would make their rent unaffordable. Six per cent of the tenants were found to have rent that isn't affordable at all. When looking at traditional income ratio based measures, 20% of Flagship's customers had unaffordable rent. This is 14% higher than the measure used in the CRESR research (which is based on tenants' perception of both rent affordability and their financial situation). Affordability varied according to local authority area. Essex had the highest proportions of tenants (14%) with unaffordable rent. This was more than double when compared to Norfolk (6%) and Suffolk (6%). Interesting findings about the household incomes of our tenants included: 57% have a gross household income of less than £15,600, 30% have incomes below £10,400, and 7% with incomes above £31,200. The research showed rents are currently set at appropriate levels for almost all tenants. The cost of rent was not a common reason for difficulties in paying rent. They were: unexpected expenses, increases in outgoings and decreases in income - for example due to health or job loss. Marie-Claire Delbrouque, Director of Housing & Customer Insight at Flagship, said: -Working on the project has been a really interesting journey and has seen us positively engage with more than 2,500 of our customers. -Our research is essential in discovering how we ensure our approach to affordability is correct and that we are addressing any affordability-related issues now and in the future. Having accurate data allows us to put in place the right tools, so we have a more robust way of assessing people's ability to pay their rent when they sign up with Flagship. Ian Wilson, who led the research from Sheffield Hallam University, said: "The research provides a new way of assessing rent affordability that is receptive to an individual tenant's lived experience. Only a small proportion of tenants were found to have unaffordable rent, however a larger proportion were at risk of unaffordable rent. "The study also identified how welfare reforms will impact on the affordability of social housing, with the effects being felt unevenly across different household types. Notably, Universal Credit will give more tenants responsibility for paying their rent and expose them to the possibility of unaffordable rent." Recommendations from the report included: Using a Rent Affordability Assessment Tool to assess rent affordability for tenants and prospective tenants Triaging all tenants entering arrears for the causes of unaffordable rent and to put in place necessary support Being proactive in preventing problems associated with unaffordable rent, particularly in anticipation of forthcoming welfare reforms. Click here for the full report (link at end of article).

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