Just 5 per cent of privately rented properties are affordable, representing the lowest level on record

Institute for Fiscal Studies reports that private rented homes are also more likely to be unsafe, in disrepair, difficult to adequately heat or to lack modern facilities

Just 5 per cent of privately rented properties are affordable – the lowest level on record – according to the Institute for Fiscal Studies (IFS).

In new analysis looking at the affordability and quality of private rental housing for low-income people, the IFS highlights that, in the wake of the pandemic, local housing allowance (LHA) rates – which cap entitlement to help with housing costs through either housing benefit or universal credit – were increased to the 30th percentile of local rents and, at that point, 23 per cent of private rental properties listed on Zoopla were affordable.

However, with LHA rates having been frozen since then, the IFS reports that, in the first quarter of 2023, the proportion of affordable properties in the private sector had dropped to just 5 per cent – the lowest level on record –

Percentage of private rental properties on Zoopla within the LHA

In addition, while there is some variation across the nations and regions, the IFS reports that the decline in affordability has been felt across the whole of Great Britain, with the share of properties that are affordable for benefit claimants ranging from 2.5 per cent in Wales to 6.9 per cent in the North East.

NB – in its Equality Analysis for maintaining Local Housing Allowance rates from April 2023, the DWP suggests that options for mitigation for those facing a shortfall between their LHA award and contractual rent include considering looking for cheaper accommodation either in the same area or further afield, either of the same size or smaller depending on their household size, or to consider sharing accommodation, such as entering into a house-share arrangement to cut down on rental costs.

The IFS's analysis also reveals that, not only are affordable properties less available in the private sector, but they are also of poorer quality –

• low-income families in private rented properties are much more likely than social renters or owner-occupiers to be living in homes that are hazardous, in disrepair, difficult to adequately heat or that lack modern facilities – around a quarter of private rented homes lived in by low-income people would fail the Decent Homes Standard which social rented properties are legally required to meet; and
• affordable homes are 15 per cent more likely to have an energy rating of D or below, leading to 19 per cent higher heating and hot water costs.

Research Economist at IFS and co-author of the report Tom Wernham said today –

'Compared with homeowners, renters in the social and private sectors face higher rates of poverty and lower living standards. With housing support frozen and falling well behind rents, only 1 in 20 newly listed private rental properties could be covered by housing benefit. And the properties that are covered by benefit rates are of lower quality and more expensive to heat than the average. If these benefit freezes are maintained, private rents will become increasingly unaffordable for those on low incomes.'

For more information, see Housing benefits have been frozen while rents have sky-rocketed. Only 1 in 20 private rental properties on Zoopla can be covered by housing benefit from ifs.org.uk