A new report by Centre for London has exposed the way in which housing costs are driving inequality in the capital, and increasing poverty amongst private renters.

Housing and Inequality in London shows that private renters – who have seen rent increases of 20 per cent in the last five years – have experienced a dramatic decline in disposable income. The report reveals that between 2001-2011:

• Private renters in inner London saw a 28 per cent decrease in weekly median household income after housing costs, while those in outer London experienced an eight per cent decrease.
• Traditional assumptions about poverty and housing tenure are being eroded; the proportion of people in poverty living in private rented accommodation increased by 10 per cent.

The report goes on to show how the rising cost of renting and homeownership in London is suburbanising poverty. With median house prices in inner London now 47 per cent higher than in outer London, lower skilled, lower income workers are moving to the suburbs in search of affordable housing.

This trend is reflected by poverty rates which have been increasing in outer London since 2001, while declining in many inner city areas. By 2011, Brent, Ealing, Redbridge and Enfield had a higher poverty rate than Lambeth or Camden. Meanwhile poverty reduction in inner East London was significant – in Islington and Hackney rates declined by 7 per cent.

The housing crisis is further increasing inequality across the city by inflating the value of housing assets at the top, while simultaneously preventing wealth accumulation at the bottom. Households with most property wealth have seen their wealth increase between 2006 and 2012; on average the top 20 per cent of households in London have increased their property wealth by 25 per cent (+£130,000) while their counterparts in the rest of the country have lost property wealth.

Sam Sims, Research Manager at Centre for London said:

“Increasing housing costs are not the only driver of inequality in the capital, but the links between housing and inequality can no longer be ignored.

“This report shows that wealth disparities in London are being further inflated by increasing house prices, opening up a widening gulf between Londoners with housing wealth and those without, who are finding it ever harder to get on the first rung of the housing ladder.”

Reuben Young, Research & Policy Officer at Family Mosaic, said:

“The trend of private renters both increasing in number and becoming poorer is worrying. There are 260,000 households on social housing waiting lists in London, and despite the best efforts of the sector, housebuilding will not keep up with demand for genuinely affordable homes. While initiatives like Starter Homes and Help to Buy may help some families onto the housing ladder, we need to make sure this is not at the expense of the less well off.

“This report is a welcome addition to the growing body of evidence on housing and inequality in London. Family Mosaic remains committed to tackling housing need in the capital by developing homes and supporting the health, wealth, and wellbeing of our customers.”

Dr Yvonne Doyle, Regional Director for PHE in London, said:

‘‘This report discusses how housing costs can influence wealth inequality in London. The causes of health inequalities are complex and result from a combination of factors related to daily life, including people’s incomes, employment, education and access to services

“Housing is also a determinant of health in itself, both mental and physical. Locally, as well as nationally, we will work with partners including the GLA to see how we can help ensure that health considerations underpin planning considerations.’’

Steve Moseley, Assistant Director Strategy and Operations at L&Q, said:

“This report is a welcome contribution informing the debate around inequality and the particular role played by housing. It highlights more than anything the importance of housing supply and how the deficit of supply compared to demand has created adverse impacts across all tenures in London, increasing inequality.

“By analysing and understanding the changing characteristics of poverty, inequality and housing markets, we can begin to understand how as an organisation we can adapt and strive to meet the housing needs of our existing and future customers.

“This report emphasises the scale of the task. L&Q have already committed to build  50,000 new homes for sale and rent over the next decade and we are keen to work with all our partners to do even more to tackle inequality.”