May is urged to consider policy of 'living rents' linked to wage levels

Theresa May is being urged to consider a policy under which housing rents would be linked to local wage levels.

The call, in a report suggesting the government consider a radical new policy of “living rents”, comes as the prime minister chairs the first session of her social reform committee, which will look into how to make housing more affordable for families.

The prime minister has put together a team of 11 cabinet ministers, including Sajid Javid who will oversee housing as communities secretary. She said the group would meet regularly to discuss making “life easier for the majority of people in this country who just about manage”.

As well as housing it will look at issues such as job security, education and the way that non-white people are treated by public services.

May said she wanted ministers to focus on vulnerable individuals but also a much wider group who just get by. “You might have a job but you don’t always have job security,” she said. “You may have your own home, but you worry about paying a mortgage. You can just about manage but you worry about the cost of living and getting your kids into a good school.

“So while we continue to help the worst off we will also be focused on the millions of people for whom life is a struggle and who work all hours to keep their heads above water.”

The prime minister did not mention the cost of renting, but ahead of the group’s first session, the Joseph Rowntree Foundation, a social policy research and development charity, has argued that the sector needs to be urgently looked at. It is calling on the government to consider the policy of living rents, which it has drawn up along with the National Housing Federation and the estate agent Savills.

Brian Robson, policy and research manager for housing at the Joseph Rowntree Foundation, said: “House prices and private rents have soared way above what people can afford, leaving people on low incomes struggling to make ends meet day to day. It means the dream of home ownership has rapidly faded. For many, buying is simply not an option.

“We need to drastically increase the number of homes we build, to rent and buy, so people are not trapped in poverty by their housing costs. Building more affordable rented homes and linking them to local wages will give more people a home at a price they can afford.”

The idea would be that a household with someone in full employment could access rents based on the bottom quarter of local earnings, starting at a level based on 28% of that figure. That is far lower than at current levels when the poorest families can pay 55% of their incomes on rent.

The Joseph Rowntree Foundation calculated that social landlords could meet 70% of the cost, around £7bn a year. There would then be a capital top-up of £3bn – just over £1bn more than is currently planned to be spent on affordable housing.

The result would be 40,000 affordable homes to rent, which the group claims would then cut the housing benefit bill by £5.6bn a year.

It points out that England alone needs to build 243,000 houses a year, with 78,000 more affordable; only 52,000 affordable houses were built last year. “The prime minister has highlighted the struggle faced by young people getting on to the housing leader, but pressure has built to ensure more homes to rent are in the picture,” it said, arguing that its policy would ease Britain’s housing crisis.