Why is homelessness increasing?

The general shortage and unaffordability of housing is the critical underlying factor for all forms of homelessness. This is compounded for rough sleepers by a particular shortage of suitable types of accommodation, and a lack of support for people trying to transition away from the streets, including a lack of co-ordination in service delivery.

Affordability and benefit changes

The unaffordability of housing arises from a combination of increasing prices and stagnant incomes. The standard measure of affordability of housing is the ratio of house prices to average earnings. House prices in 2018 were 9.2 times average earnings, compared with 7.4 in 2010 and 4.5 in 2000.

The rented sector is more relevant than home ownership for most rough sleepers. However, the lack of affordability of house buying affects the rented sector by pricing out of the market many, especially the young, who would otherwise buy, increasing pressure on the rented sector.

Rents also became much less affordable in the first half of the 2010s. This is shown in the chart below which compares increases in average (median) full time earnings with changes in private rental prices. In all regions except the North East and North West rents rose faster than wages. The trend was particularly marked in London. The trend was exacerbated by reductions in housing benefit, which have further reduced affordability. However, the increase in rents has been much more moderate since then, increasing by only a total of 6% between the end of 2005 and 2019 .

This is not only about “affordable homes” in the sense of providing basic low-cost accommodation, although this may play a role. The general shortage of housing creates knock-on effects, with, for example, those who would normally expect to be moving up the housing ladder stuck on the bottom, so that lower cost housing does not free up as it should.

Consistent with this picture, a report by the National Audit Office (NAO)[1] identified three main reasons why homelessness varies around the country. Homelessness tends to be higher in:

Areas where a higher proportion of households receive housing benefit, especially where there are more lone parents, and more claimants who are in private accommodation and working.
Cities which take a leading role in the regional or national economy, especially London.
Areas where private rents are higher and have increased more.

Together these account for a little under half the variation in homelessness across the country. A fourth factor, variations in local authority services, was explicitly excluded from the scope of the analysis, but likely also plays a significant role. Many other specific local factors also probably play some role.

The importance of affordability is emphasised by the causes of the loss of the last settled home. Loss of rented accommodation (Shorthold Tenancy Agreement – STA) is now the leading cause of statutory homelessness. This chart shows the reasons for the loss of the last settled home in England. It shows that since 2011 most causes of homelessness have stayed roughly constant. The loss of tenancy in rented accommodation accounts for almost all of the increase. In contrast acceptances due to mortgage arrears and social sector rent arrears remained at historically low levels, implying a particular problem in the private rented sector.

The NAO analysis points to the likely influence of housing benefit changes, which have put pressure on affordability. The issue of affordability is accompanied by an apparent reduction in landlords’ willingness to lend to those on housing benefit.[2] These conclusions were supported both by their analysis and by interviews with local authorities. They note:

“We asked open questions about what was causing the increase in homelessness in their [LA’s] area. In all cases front-line staff said that the key reason why people were presenting as homeless was the end of tenancies in the private rented sector. They said that this was due to increases in rents in the private sector, and a decline in people’s ability to pay these rents. This decline in ability to pay was said to be partly due to welfare reforms.” [3]

Another survey of local authorities also indicated a near unanimous view that continuing welfare changes would exacerbate homelessness.[4] This may include difficulties due to the roll out of Universal Credit.

Factors specific to rough sleeping

Lack of affordability, including changes to the benefit system, appears to have boosted rough sleeping consistent with its role in the wider increase in homelessness. However there are other specific factors that are likely to affect rough sleeping, including:

The closure of hostels.
Reduced access to support and social care services,[5] in part due to cuts in local authority budgets.
Lack of availability and co-ordination of delivery of services, for example around housing, substance abuse and mental health.

Over three quarters of rough sleepers have problems with at least one of mental health, drugs and alcohol, with corresponding support needs. This is illustrated in the chart below. The causality runs both ways – rough sleepers develop problems due to their circumstances, while those with problems are more likely to find themselves sleeping rough.

Source: Greater London Authority Rough Sleeping Action Plan

Non-UK nationals

In London the increase in non-UK nationals sleeping rough has been a large component of the total increase in rough sleeping. This increase is likely linked to restrictions that came into effect in 2014 relating to migrants’ access to benefits, including housing related benefits.