Blog: Defining housing affordability, by Dan Wilson Craw

At the launch of the Affordable Housing Commission in October, Lord Best, a veteran of a string of commissions spanning the past thirty years, related an experience he’d had with one that looked at the future of the family. More than halfway into it, its chair came to meet its sponsor (then plain old Richard Best) and admitted that they were a little behind schedule as they hadn’t agreed on a definition of “family”.

From the off, members of the commission – of which I am one – are therefore highly conscious of the need to get the basics right. But not only do we need to know what “affordable” means – does this include owner occupation? – we also need to define home.

It would be easy to tick the box saying “build more affordable housing” if we tore up planning rules and allowed developers to produce tiny rooms with a bed, sink and hotplate each, and then rent them out at less than what one-bed flats go for. It would be housing, it would be affordable, but it wouldn’t provide homes – especially not for the families who are most in need.

What we need first, then, is an agreed definition of “home”. These are some early thoughts, which I expect to change my mind about over the course of the commission’s work.

A home has to provide shelter, warmth, and space for its occupants to sleep, cook, sit (to eat/do homework), wash, and store food and belongings safely. It needs to be wired, lit, plumbed and free from hazards and disrepair. Accommodation that lacks one or more of these things shouldn’t be considered a home.

The government defined a decent home in the Decent Homes Standard of 2006, and in 2018 introduced a minimum bedroom size standard for houses of multiple occupation (HMOs). The latter defines the minimum space someone should expect to have to sleep in, depending on their age (children under 10 are usually expected to share). But we should go further and set a standard for communal space that is large enough for all occupants to use at the same time. A 4-bed house with two living rooms converted into bedrooms should not have only a kitchen serving up to 6 adult couples if we should consider it a home.

Once we are happy with the size of the property we should also consider what costs the people living there incur by occupying it. Even if the rent is cheap, the property could be poorly insulated or have an inefficient heating system, which raises the cost of keeping it at a comfortable temperature. What you might save in rent goes to your energy supplier instead. In theory Energy Performance standards should help minimise the risk of fuel poverty.

Similarly, the home might be a long commute from any centres of employment, which would see any savings in rent go to bus operators or petrol stations. The extra time spent commuting would reduce quality of life as well. Given the complexity of employment and transport patterns, this is harder to address than energy efficiency, particularly as there is a severe shortage of affordable homes in rural areas. But the commission should consider the impact of commuting – perhaps be within 10 minutes’ walk of public transport or shops, or an hour’s walk from the nearest town centre?

We’re lucky that Shelter has already done a lot of this in its Living Home Standard, produced in 2016. They explore these questions further, including what people have left after they pay their rent.

Once we have a reasonable definition of a home, we need to ask how much it should cost to rent. Generation Rent is campaigning to make renting a viable long term option that offers as good a quality of life as owner occupation. Without getting into questions of whether people are better off putting their savings into a pension or their home, we ought to focus our efforts on making rent affordable rather than home ownership.

It should be possible to afford a 2-bedroom house if you are the sole earner in a family with two children. For example, one partner looks after pre-school children

One rule of thumb we could use is that if you work full time, are the household’s sole earner and are raising two pre-teen children you should be able to afford a two-bedroom home with no more than 30% of your gross salary.

Workers on the National Minimum Wage get £313.20 if they work 40 hours per week, so an affordable rent would need to be £93.96 per week, or £407.16 per month. In most parts of the country even the cheaper rents exceed this, so such workers will rely on housing benefit. Perhaps reducing rents low enough that housing benefit is unnecessary for most full-time workers could be a longer term aspiration.

More intermediate goals might be to ensure the lower quartile rent is no more than 30% of the lower quartile monthly wage. This would be easier to achieve in some parts of the country than others – in the West Midlands rents would need to drop by 4% but in London they would need to nearly halve. In more expensive areas even the median rent is not affordable for the median full-time earner, so addressing that might be the priority there.

An exercise to identify the maximum affordable rent for the lower quartile earner (or other benchmark) could help develop living rents based on the area of a home. For example, if an 80sqm home is considered adequate for a family of four, and a household at the lower quartile in London can afford £673.50 a month, then a living rent could be set at £8.42 per sqm in London.

Once we decide on what a home is and what rent would be considered affordable, then the Affordable Housing Commission would have a clear set of guidelines to understand the problems the UK faces, and how to start fixing it.

Dan Wilson Craw is director of Generation Rent and an AHC Commissioner