'High rents stalling economic recovery'

Published by Max Salsbury for 24dash.com in Housing and also in Communities, Finance

The high cost of private rents is contributing to the UK's ongoing economic woes, a member of homeless charity Shelter's policy team has said.

Writing for the London School of Economics' website, Peter Jefferys claims that if rents had risen at the rate of inflation since 2000 rather than above it, the UK's renters would have an extra £8bn of disposable income a year.

Mr Jefferys argues that money collected by landlords does not end up being re-circulated in the economy but is mostly used to service mortgages on landlords' portfolios. He points out that this wouldn't be so much of a problem if banks were willing to lend to new buyers at reasonable rates, which they aren't.

Shelter has collected evidence that suggests renters are cutting back their spending on consumer goods and services - money which could help to fuel recovery. Mr Jefferys notes that for some low-income renters, over 70% of their wages go on rent costs.

Mr Jefferys also highlights the costs to government from an increase in the housing benefit bill. He wrote: "There is also the crucial point that high private rents increase the housing benefit bill, which currently costs the government more than £20bn per year (having doubled over the last decade).

"In a recent report we set out how the balance of government spending on housing has shifted from spending on house building to spending on housing benefits. Our analysis shows that if just 8% of private rented tenants moved to affordable social homes the government would recover £200 million in savings."

The blogger recommends building affordable social homes and a reformation of the private rented sector as a means to solve the problem.