Professor Kenneth Gibb: Towards a shared understanding of housing affordability

What does it mean to say the cost of housing is affordable or unaffordable? When are rents charged truly affordable? Do governments in Scotland, or at UK level, use affordability in a consistent sense when setting policies relating to how much we pay for our homes? 

There is a widespread sense in the housing sector that answers to these questions are unsatisfactory. There was also concern expressed by the Scottish public about levels of non-affordability in Scotland (e.g. house prices and private rents rising relative to incomes) and confusion over the use of multiple, different definitions. This led the Scottish Government, through its 2021 long-term housing strategy, Housing to 2040, to establish a working group to wrestle with these questions and come up with recommendations to provide a ‘shared understanding’ about what housing affordability means.

While the working group was serviced and supported by Scottish Government officials, the work was independent, and the group represented the housing sector and other interested areas of expertise e.g. poverty. I chaired the group, and we worked for much longer than ‘short life’ working groups normally do, partly to find the space to debate the issues but also because we had to work out differences over specifics and because of other delays we were less able to avoid. 

Our nine recommendations to the Scottish Government followed a process of consulting background evidence (affordability has been debated for more than 35 years in the UK), we listened to guest speakers, we also conducted new research involving focus groups, adding affordability questions to a national representative survey, and we interviewed the members of the working groups individually. We then debated the underlying principles of a shared understanding, made several intermediate decisions (which not everyone agreed with) and argued through several drafts of the report and recommendations.

Our starting point was that it was not reasonable to imagine that there is a clear single objective answer to what affordability means in a housing context. It is inherently normative, judgemental and subjective. This vagueness leads some housing experts to reject the concept altogether and to use different terms, not without their own problems, such as low-cost housing. More pragmatically, we accepted the impossibility of a silver bullet answer and sought, realistically, a sufficiently consensual solution that was based on good practice and widely recognised measures and concepts (such as after housing costs relative poverty and the Joseph Rowntree Foundation Minimum Income Standard). Among other things, this would mean that future policies and practice aimed at delivering’ affordability’ would be using a common definition of that elusive concept.

A second underpinning theme is that housing affordability should be conceived through a Human Rights lens as a critical component of the Right to Adequate Housing. This is the underlying vision of Housing to 2040. What this means in practice is two-fold: an acceptable housing cost burden allows sufficient non-housing income to be able to meet other fundamental non-housing human rights. Second, a key principle of the Right to Adequate Housing is that it can only be realised progressively over time. The housing system moves slowly and can only change positively through aligned consistent long-term policy. Affordability goals won’t happen quickly but with consistent and sustained actions we can make real progress. Government should therefore monitor and report on progress and performance regarding the component indicators of the shared understanding.

This creates a target for policymakers to seek to achieve in the long term – by the end of the strategy period (2040). This is important for thinking about government aligning other relevant non-housing policies to help achieve these affordability targets by ensuring that policies are aligned with the goal in the same way that the overall mission of the Scottish Government is to eliminate child poverty. 

After all, we can be confident that better housing outcomes, such as improved affordability, also improves health and educational outcomes, economic growth and wellbeing, let alone contribute to combatting poverty and inequalities. This is why our first recommendation is to make achieving the affordable goals by 2040 (and monitoring their progress) a high-level goal of the government as a whole.

The shared understanding is that affordability is fundamentally about two things: housing costs and household resources. We must not forget the importance of growing jobs, wages, productivity and, critically, benefits. And benefits are largely under the control of the UK Government. Achieving affordability is as much a function of those government departments and agencies that work in these critical sectors, as it is about levels of housing subsidy and rules over how many homes should be affordable within larger private developments. 

A final dimension is to recognise that social landlords already have long term business plans and difficult choices about how they use their planned surplus rental income (to invest in their stock, to decarbonise that stock, and to contribute to building new homes). It would be completely counter-productive let alone harmful to tenants were the Scottish Government to exert pressure on social rent-setting. Social landlords have a good record of maintaining affordable rent increases in often difficult circumstances. We need a holistic approach: anti-poverty measures, job growth, more training and regularly uprated living wages, and the potentially affordability-stabilising effects of the new rent control areas, alongside sufficient new social housing to meet need, but also progress with benefits measures such as Universal Credit and the level and growth of the Local Housing Allowance.

The report and its recommendations are now with Scottish Ministers, and we await their official response.

The shared understanding operates at a Scottish level for all rented households. We recommend capturing the same measures at Scotland levels for different household types, rurality, and for those with protected characteristics. Recommendation 7(a) sets out the three-part definition: First, the national policy guideline or assumption – rent and service charge is no more than 30% of net monthly income. Second, there is a minimum residual income relating to the after-housing costs version of the Joseph Rowntree Foundation Minimum Income Standard (with a possible supplementary indicator based on the Annual Survey of Hours and Earnings 30th percentile, as discussed, conditional on it being successfully refreshed in the light of tax and benefit changes since its introduction and use in the Scottish Federation of Housing Associations affordability tool). Third, if, after housing cost income is below the UK relative poverty benchmark, the housing is therefore not affordable[1]. 

[1] A second companion blog will go into the detail of the reasons for the decisions made that allowed us to arrive at the specific definitions.