Moving Up: Higher wages for social housing tenants

This research looks at the employment challenges among a group in society for whom the economy has too often not worked: namely social housing tenants. In particular it looks at the challenges of low pay and ‘in-work poverty’.

It comes in the context of the introduction of important measures affecting wages, housing policy, benefits and work incentives, as well broader concerns about immediate economic uncertainties following the decision to leave the European Union. In addressing these issues, this report speaks also to a wider agenda – the social role of housing associations and the steps that landlords can take through housing and beyond to help their tenants.

THE CHALLENGE OF LOW PAY AND IN-WORK POVERTY IN SOCIAL HOUSING

Social housing continues to provide a significant proportion of all homes in England. In 2014-15, there were 2.3 million properties let by housing associations and 1.6 million properties let by local authorities.

Despite housing some of the most vulnerable in society, social rented households are now much more likely to have someone in work than in past decades. The number of households with no-one in work has fallen by 300,000 in England or by nearly a fifth in proportional terms since 1996. However, there are 1.75 million people living in poverty in working households in the social sector. Average hourly wages among social housing tenants are very low (£7.78) – compared to £11.11 in the economy as a whole. The result is that half of workers in local authority housing and 45% in housing association homes earn below the low pay threshold (as measured by two thirds of the hourly median wage). This compares to nearer a fifth for the rest of the population. Not only do tenants typically earn low wages, but many also work shorter hours. This has become more pronounced in social housing over time: in 1999, the ratio of full-time workers to part-time workers in England was 4:1; by 2013 this ratio had reduced to 2:1.

A wide range of factors contribute to this situation, including low levels of skills, and the prevalence of both lone parenthood and long-term health conditions and disabilities. In one sense, this confirms the fact that housing associations and councils are performing their ‘social’ job of housing the most vulnerable in society. However, it also suggests that social-rented households often face different, more complex or deeper challenges than people in other tenures. This makes it all the more important that any interventions are tailored and informed by an understanding of their needs.

IMPROVING THE WAGE AND EMPLOYMENT PROSPECTS OF SOCIAL TENANTS

The National Living Wage (NLW) is helping address this problem of low pay. Our analysis indicates that more than a third of employees in the social rented sector can expect to see a wage increase by 2020 as a direct consequence of the Government’s new policy to introduce a higher regulated wage for those aged over 25. On its own, the NLW would have significant positive effects for household incomes and for work incentives. However, the NLW in combination with changes to Universal Credit will not be so benign, producing a wide range of winners and losers.

Policies to improve the earnings prospects of social housing tenants

Therefore, more focused interventions will also be necessary. Because of their proximity to their tenants, social landlords may be particularly well- placed to assist them. Four in ten housing associations already provide employment and skills support to their tenants, including by setting up social enterprises, providing training opportunities and using their role as employers and contractors to make apprenticeship and employment opportunities available. But, more could be done and the report recommends the following steps:

1. Building the wider role of housing associations in a time of revenue constraint. Significant reductions to housing association revenues are set to put pressure on their ability to fulfil their broader roles as social market institutions, for instance in the sphere of employment support. With this in mind, the Government should look to innovative ways to help landlords continue to play a broad role in the lives of their tenants. This could include the Treasury making a deal whereby tenants could opt to have their rent paid direct to their landlord; in return for this greater certainty of income, housing associations would commit to allocate a portion of this revenue to a fund to help training and employment support or to boost work incentives for tenants.
2. Employment support and help to those in low paid work. The new Secretary of State for the Department for Work and Pensions should prioritise the needs and interests of workers who are stuck on low pay. The department should pilot a programme for tenants claiming Universal Credit who have been on a low wage for three years. The Government could enter a risk-sharing arrangement with housing associations to improve their earnings – social landlords therefore would have the potential funding available to create training and employment initiatives.
3. Building more affordable homes. With private development likely to fall back post-referendum and indicators of economic uncertainty growing, the Government should look to stimulate the building of more affordable homes potentially by re-opening the Affordable Housing Guarantee Scheme, which would enable cheaper finance for housing associations to get developments underway.
4. Building new homes near jobs. There are implicit dangers in the policies of Right to Buy for housing association tenants and the divestment of the most valuable local authority properties. New affordable housing that replaces this stock may have poorer access to good labour markets. Therefore, the Government should commit to ensuring that replacement homes are situated in places that have the same or better employment opportunities (for instance in terms of job vacancies or employment rates).