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A third of income is being spent on housing from over 3 million families

A third of income is being spent on housing from over 3 million families

More than 3 million households now spend at least a third of their earnings on housing costs, which has more than doubled from 1.6 million in the mid-90s.

The amount of people’s income
consumed by rising housing costs throughout the past 20 years is equal to a 10p increase in the basic rate of tax for the typical family.

The reason behind the increase is that the amount of income families spent on housing costs during the 90’s and early 2000s was mostly even at around 17%. However, mortgages and rent began to increase as a share of income in the mid-2000s, as property prices rose more quickly than pay.

While the situation improved in the wake of the financial crisis due to house price falls and low interest rates, rising housing costs are once again exceeding income growth.

Private renters have been the most affected, with this group now outlaying an average of 30% of their income on housing, compared with 23% for homeowners with a mortgage and 20% for social renters. Individuals on low and middle incomes have also been struck hard, with the part of income spent on housing rising from 18% in the past 20 years to 26%. People living in London have to spend the highest amount on housing out of all of the regions at 28%. Furthermore, people in the capital have undergone the greatest post-crash drop in disposable income in the UK.

With the typical household now forking out 21% of their income on keeping a roof over their head, high housing costs were acting as a major break on the recovery in living standards. A stronger income growth and policy action could possibly help to bring the future housing affordability
predicament under control.


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