More than 1.6m households in the UK are spending most of their net income on housing, putting pressure on their finances, a think-tank has claimed.
A 15-page report from the Resolution Foundation found a significant number of households in the UK cannot contribute to the UK’s economic growth through domestic consumption, because they are spending more than half of their net income on housing costs.
The most recent statistics, from 2011/2012, showed that 1.6m households — equating to 5.9 per cent of all households in Britain — are ‘housing pinched’.
Of this group, the report found that roughly 830,000 are working households with lower incomes. It is estimated that this group had an average of just £60 a week left over after paying for housing.
The research showed that certain characteristics increase the likelihood of households falling into the ‘housing pinched’ category. The report estimated that more than a quarter of the ‘housing pinched’ are living in London, where private renting is more prevalent and housing costs are generally higher. Additionally, the report, Housing Pinched: Understanding Which Households Spend the Most on Housing Costs, predicted the continued rise in house prices and interest rates could push more households into the ‘pinched’ category.
Table: Proportion of households in the ‘housing pinched’ category
| Type of Household | Percentage | Number |
| Private renters | 12 % | 396,000 |
| Mortgagors | 6 % | 491,000 |
| Social renters | 4% | 59,000 |
Reaction Round-up
Industry view
Bernard Clarke, spokesman for the Council of Mortgage Lenders, said: “The CML has revised downwards our forecast for mortgage arrears and possessions for this year, as mortgage arrears are at an eight-year low. This suggests that households are generally coping well with housing costs even while real incomes are falling. Rates will rise at some point and households should be prepared for that.”
Adviser view
Kim Barrett senior partner for Hertfordshire-based Barretts Financial Solutions, said: “I share similar concerns. The financial troubles many households find themselves in are largely a result of irresponsible lending in the past to people who are unable to keep up with their mortgage rates.”
