New report reveals ‘low pay penalty’ for social housing tenants

Workers living in social housing face a ‘pay penalty’ compared to those in other types of accommodation, a new report from the Social Market Foundation (SMF), supported by Circle Housing, reveals.

The report, Moving Up: Higher wages for social housing tenants, shows that average hourly wages among social housing tenants are very low compared to the economy as a whole. The report calls for the new government to support providers of social housing to improve the employment, training and wage progression prospects of their tenants.

Click here to download the report: Moving Up: Higher wages for social housing tenants. (PDF 873kbs)

Key findings from the report:

  • An individual in social housing earns an average of £7.78 per hour compared to an average of £11.11 per hour for those living in other types of accommodation.
  • An individual is likely to have lower wages if they live in social housing: 15% less per hour than a similar person in a property that is owned outright and 9% less than someone in the private rented sector.
  • Half of workers in local authority housing and 45% in housing association homes earn below the low pay threshold.* This compares to nearer a fifth for the rest of the population.
  • A larger proportion of social housing tenants are now in work than in past decades. However, many work short hours. In 1999, the ratio of full-time to part-time workers in England was 4:1; by 2013 this ratio had reduced to 2:1.

The report identifies a number of factors that drive down wages, including low skill levels (with 45% of tenants having no recognised qualification); lack of access to training; caring responsibilities; prevalence of work-limiting health conditions (affecting one in three working adults in social housing); and geographical factors such as access to jobs.

The National Living Wage (NLW) will help address the problem of low pay in the social housing sector, with more than a third seeing a wage increase by 2020 due to the NLW. But, the report calls for much wider action to drive social mobility.

Recommendations from the report:

  1. A ‘Better Pay deal’. The Treasury should make 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. The Government could enter a risk-sharing arrangement where housing associations are rewarded for improving the earnings of social housing tenants. The Department for Work and Pensions should pilot a programme for tenants claiming Universal Credit who have been on a low wage for three years.
  3. Re-open the Affordable Housing Guarantee Scheme to help build more homes - with private development likely to fall back post-EU 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. The Government should commit to ensuring that replacement homes for Right to Buy are situated in places that have the same or better employment opportunities(for instance in terms of job vacancies or employment rates).

 With Theresa May calling for ‘an economy that works for everyone’ – we need to confront the pay penalty that social housing tenants face. While we are seeing much higher levels of employment among social housing tenants, the wage penalty they experience is dramatic. Many face complex challenges of caring responsibilities, low skills and ill-health. This makes it all the more important that any interventions are tailored and informed by an understanding of their needs.

There is much that housing associations are doing already to help, but the sector and the government need to think more radically about how they can work together to boost the work and wage prospects of social housing tenants and improve social mobility.
Nigel Keohane, author of the report and research director at the SMF
Mark Rogers, Chief Executive for Circle Housing
This research confirms that while on the surface more social housing residents than ever before are now in work, in reality this has not translated in to an up-turn in their living standards.

Social housing providers, like ourselves, have for a long-time invested in improving residents’ job prospects and in the past year alone, we have supported around 4,000 residents through our employment and skills initiatives. However, we know first-hand that low wages coupled with a variety of specific challenges are holding many of our residents back from experiencing improved social mobility.

We therefore urge the Government to capitalise on the sector’s understanding of these complexities by working with us to deliver innovative and tailored solutions to help improve our residents’ lives.
Mark Rogers, Chief Executive for Circle Housing
Circle Housing is also committed to initiatives in partnership with other providers, to improve the employment, training and wage progression of social housing tenants and others in the wider community:
  • ‘Love London Working’ is a new programme to tackle unemployment in the capital. A group of 16 London housing associations, of which Circle Housing is part of and led by Affinity Sutton, will support 21,000 unemployed Londoners helping over 6,500 into work, many for the first time. It has a particular focus on those experiencing major barriers to work, such as a disability
  • The proposed merger between Circle Housing and Affinity Sutton will become one of the country’s biggest providers of employment services and help 4,000 people a year into work. It will generate a social return on investment of over £1 billion, which will, amongst other things, help more than 200 young people into apprenticeships and support 15,000 young people get a better start in life

Click here to download the report: Moving Up: Higher wages for social housing tenants. (PDF 873kbs)