The rate of home ownership in England has fallen to a 30 year low, leading to a significant increase in the numbers of households now living in rented accommodation.
More people than ever are renting, rather than owning their own property. For many tenants this enables them to afford a home of their choice, in the area they want. However, analysis by the Bank of England has forecasted a potential increase in unemployment by more than 200,000 people over the next couple of years. This has the potential to leave more people than ever at risk of losing their home if they lose their job.
One at-risk group would be two-salary couples, a group which has seen a particular rise in renting percentages. If one wage were to be lost the potential help from housing benefit could be minimal. Calculations can be complicated – the take home pay of the working partner is compared against the job seekers allowance if both were unemployed. This enables them to see the ‘excess’ income, of which 65% of this is expected to contribute to the rent. For a couple earning £25,000 and £10,000, if the lower earner lost their job then they would get no help at all with rent up to £684.58 per month.
There are, of course, many other scenarios in which people can be affected. Single people under 35 years old face a real gap in what they have to pay compared to the cost if they want to avoid living in shared housing. Housing benefit is also calculated on the lowest 30% of rents across a broad area, significantly affecting what becomes affordable to families if a wage earner’s job is lost.
While many people looking to buy their own home have to very carefully consider the affordability of their choices, including the potential impact of losing a job, tenants less commonly take precautions in this area. Clearly the loss of a tenant’s job could have extremely serious consequences not only for the tenant, but also for the landlord.
At Martin & Co we very much pride ourselves on taking the time to have these honest and detailed discussions. We will always provide whole of market investment advice, not just sign-post to what we have available on our books at the time.