Housing cost struggles up by 70 per cent since peak of the pandemic

The cost-of-living crisis has left over two-in-five working age households struggling with or falling behind on their housing costs, compared to just over a quarter of households at the peak of the pandemic, according to new Resolution Foundation analysis published today (Saturday).

The Foundation’s latest Housing Outlook uses data from a new YouGov survey of 10,470 UK adults to examine how the cost-of-living crisis is affecting people’s ability to meet their housing costs, how it varies across tenure, and the implications for households’ financial resilience and personal wellbeing in the months ahead.

While the Covid-19 crisis worsened housing stress, the report finds that the current cost-of-living crisis has delivered a far more extensive shock to households.

The share of UK working age (18-65) households who are behind on or struggling with their housing costs has risen by almost 70 per cent compared to the peak of the pandemic, from 26 per cent in January 2021 to 44 per cent in November 2022.

Renters are at the sharp end of the crisis, as private and social rents are rising at their fastest rates in a decade, on top of wider cost of living increases. One-in-twelve (8 per cent) private renters reported falling behind on housing costs in the three months leading up to November 2022, while over half (53 per cent) reported struggling with their housing costs.

The situation is even more acute for social renters, with nearly one-in-five (19 per cent) falling behind and another four-in-ten (44 per cent) struggling with their housing costs. Just 4 per cent mortgagors fell behind on housing costs over this period – although the broad-based nature of the cost-of-living crisis has led to a further 46 per cent struggling with housing costs.

The lower financial resilience of renters means that they are struggling more to cope with the cost-of-living crisis.

Nearly half of social renters (48 per cent) reported being unable to afford to replace electrical goods, or switch the heating on when needed. This fell to around a third of private renters (33 per cent unable to replace or repair electrical goods and 35 per cent unable to afford heating), and roughly a quarter of mortgagors (25 and 27 per cent respectively).

The crisis has also put a considerable strain on people’s wellbeing, say the authors. More than two-in-five private and social renters (41 and 44 per cent respectively) reported feeling fairly or very worried about covering their housing costs over the winter, compared to almost a third of mortgagors (31 per cent).

The Foundation notes that previous Government intervention during the Covid-19 crisis – banning evictions, rebasing the Local Housing Allowance (LHA) and mandating mortgage holidays – helped to minimise the impact of the pandemic on households.

But support is currently much more limited, despite many more households struggling with their housing costs in November 2022 than during the peak of the pandemic.

Overall, three-in-five social and private renters (62 and 61 per cent respectively) were behind on or struggling with their housing costs in the three months leading up to November 2022, compared to two-in-five (41 and 42 per cent respectively) in January 2021.

Increases were more dramatic (although at a much lower level) among mortgagors, with the proportion behind or struggling with their housing costs almost doubling (from 27 to 50 per cent) between January 2021 and November 2022.

The situation for all households is set to worsen in the months ahead as housing costs continue to rise – with private rental prices expected to continue increasing and interest rate rises pushing up mortgage costs for the 2 million households flowing onto new fixed-rate mortgages next year.

But with renters already more likely to be struggling with costs and worrying about affording housing costs over the next three months, the authors note that it’s clear that renters are facing the toughest year ahead.

The benefit uprating and introduction of a social rent cap in March will provide much-needed support to some struggling households. But the Government needs to go further to help households, by re-basing the LHA rates and implementing measures to allow fair mediation between tenants and landlords when arrears build up.

Cara Pacitti, Senior Economist at the Resolution Foundation, said:

“Private and social renters are at the sharpest end of the cost-of-living crisis. The fastest rent rises in a decade, alongside wider cost of living pressures, have left three-in-five renters falling behind on or struggling with their housing costs. This is significantly higher than at the peak of the pandemic, when there was substantially more Government support available to struggling households.

“With many renters reaching the limits of already depleted finances, this squeeze is having profound impacts on their household budgets and wellbeing. As housing costs are set to continue rising, the situation for renters will worsen without further policy intervention.”