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Low income families forced to spend a third of net income on housing Low income families forced to spend a third of net income on housing
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At least 1.3m families in England on lower incomes have to spend more than a third of their net income on housing, largely due to a shortage of private rented sector housing, according to a new report from the Resolution Foundation.At least 1.3m families in England on lower incomes have to spend more than a third of their net income on housing, largely due to a shortage of private rented sector housing, according to a new report from the Resolution Foundation.
The research shows how the combination of the intractable housing market and the earnings squeeze has made housing costs a key source of pressure on living standards.The research shows how the combination of the intractable housing market and the earnings squeeze has made housing costs a key source of pressure on living standards.
It also underlines the importance of the private rented sector to spiralling housing costs.It also underlines the importance of the private rented sector to spiralling housing costs.
The housing sector tends to classify housing costs as unaffordable if they are set at 35% or above net income.The housing sector tends to classify housing costs as unaffordable if they are set at 35% or above net income.
The 1.3m figure represents almost one in four of the 5.6m low-to-middle income households of working age in Britain.The 1.3m figure represents almost one in four of the 5.6m low-to-middle income households of working age in Britain.
The analysis draws on data from independent experts Hometrack, and on data from the government's Family Resources Survey to examine what proportion of their income housing represents.The analysis draws on data from independent experts Hometrack, and on data from the government's Family Resources Survey to examine what proportion of their income housing represents.
The excessive housing costs mean that families often have to make trade-offs with other areas of their spending such as furniture, clothing, travel or even food.The excessive housing costs mean that families often have to make trade-offs with other areas of their spending such as furniture, clothing, travel or even food.
The findings, reflecting rent levels in different tenures, show that of the 1.3m families with unaffordable housing, 590,000 are private renters, 585,000 are owners with a mortgage, and 100,000 are social renters. Two-thirds are outside London and the South East, but the pressure is intense across the North West, West Midlands and South West.The findings, reflecting rent levels in different tenures, show that of the 1.3m families with unaffordable housing, 590,000 are private renters, 585,000 are owners with a mortgage, and 100,000 are social renters. Two-thirds are outside London and the South East, but the pressure is intense across the North West, West Midlands and South West.
A disproportionate number, 570,000, are younger families – where the head of the household is under 35.A disproportionate number, 570,000, are younger families – where the head of the household is under 35.
The analysis looks only at regular monthly housing costs – so for example it does not take into account the cost of saving a deposit in order to buy a property or secure a rental.The analysis looks only at regular monthly housing costs – so for example it does not take into account the cost of saving a deposit in order to buy a property or secure a rental.
Previous Resolution Foundation research has shown that saving a buyer's deposit would typically take a low-to-middle income family more than 20 years.Previous Resolution Foundation research has shown that saving a buyer's deposit would typically take a low-to-middle income family more than 20 years.
This barrier, and a shortage of social housing stock which sees most of it reserved for the very vulnerable, leaves private renting as, increasingly, the leading option for many poorer working families. Yet this part of the housing sector is the least regulated and has least security of tenure.This barrier, and a shortage of social housing stock which sees most of it reserved for the very vulnerable, leaves private renting as, increasingly, the leading option for many poorer working families. Yet this part of the housing sector is the least regulated and has least security of tenure.
The Resolution Foundation analysis uses the example of a couple with one child on an annual income of £18,000 (putting them a quarter of the way up the income distribution) to see what is affordable for them  in four different parts of the country.The Resolution Foundation analysis uses the example of a couple with one child on an annual income of £18,000 (putting them a quarter of the way up the income distribution) to see what is affordable for them  in four different parts of the country.
  
The Foundation has illustrated how difficult housing costs for lower and middle income groups in four different regions.The Foundation has illustrated how difficult housing costs for lower and middle income groups in four different regions.
InNorth London it states housing is unobtainable since the monthly rent on even a modest two-bedroom property is £1,670. For the family, this would equate to 111% of their net income. The monthly mortgage payments on an equivalent property (£1,400 a month) would eat up 93% of their net income and monthly payments of £980 under a shared ownership scheme 65% – so there are no affordable options (under the 35% of net income definition) without access to low cost social housing or substantial support through housing benefitInNorth London it states housing is unobtainable since the monthly rent on even a modest two-bedroom property is £1,670. For the family, this would equate to 111% of their net income. The monthly mortgage payments on an equivalent property (£1,400 a month) would eat up 93% of their net income and monthly payments of £980 under a shared ownership scheme 65% – so there are no affordable options (under the 35% of net income definition) without access to low cost social housing or substantial support through housing benefit
In Guildford, Surrey, the monthly rent on an equivalent property is £950 which equates to 63% of the family's income. Monthly mortgage payments on the property (valued at £140,000 would be £580 which is 38% of the family's income. As a result only shared-ownership, at 27 per cent of income (a monthly cost of £400), is affordable under the 35% definitionIn Guildford, Surrey, the monthly rent on an equivalent property is £950 which equates to 63% of the family's income. Monthly mortgage payments on the property (valued at £140,000 would be £580 which is 38% of the family's income. As a result only shared-ownership, at 27 per cent of income (a monthly cost of £400), is affordable under the 35% definition
In Coventry, West Midlands the monthly rent is likely to be £500 or 33% of income. Mortgage repayments on the property would be £350, or 23% of income while  shared-ownership (£240) is 16%. Private rent is just affordable.In Coventry, West Midlands the monthly rent is likely to be £500 or 33% of income. Mortgage repayments on the property would be £350, or 23% of income while  shared-ownership (£240) is 16%. Private rent is just affordable.
In Doncaster, South Yorkshire. The monthly rent drops to £410 and accounts for 27% of income. Mortgage repayments (on a property valued at £67,500) of £280 a month, would consume 18 per cent of income. Shared-ownership, at £190, would account for 13% of income. Here all types of tenure are affordable as defined by 35% of net income.In Doncaster, South Yorkshire. The monthly rent drops to £410 and accounts for 27% of income. Mortgage repayments (on a property valued at £67,500) of £280 a month, would consume 18 per cent of income. Shared-ownership, at £190, would account for 13% of income. Here all types of tenure are affordable as defined by 35% of net income.
 Vidhya Alakeson, deputy chief executive of the Resolution Foundation said: "We've become used to the idea that buying a property is now an impossible dream for millions of people on low to middle incomes – in a typical case it would take 22 years just to save the deposit. But increasingly, private rent is also becoming unaffordable even though, for many families, it is the only option." Vidhya Alakeson, deputy chief executive of the Resolution Foundation said: "We've become used to the idea that buying a property is now an impossible dream for millions of people on low to middle incomes – in a typical case it would take 22 years just to save the deposit. But increasingly, private rent is also becoming unaffordable even though, for many families, it is the only option."
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