It costs between 18% and 56% more for households to reach decent living standard in London compared to rest of UK.
New research from Loughborough University shows that 41% of Londoners have less income than they need for what the public regard as a decent standard of living – that is one that allows them to meet their basic needs and participate in society at a minimum level. This is significantly higher than the 30% that fall below the standard in the UK as a whole. This represents 3.5 million Londoners, an increase of 400,000 since 2010/11.
The new research, funded by Trust for London, updates the first Minimum Income Standard for London report published in 2015.
The single biggest change since the last MIS London report is the increased cost of private renting, especially for properties at the cheaper end of the market, which have increased four times as much as in the rest of the UK. This means that although single working-age adults in the rest of the UK have benefitted from the substantial pay boost of the National Living Wage (since its introduction in 2016), singles in London are actually less able to afford a decent standard of living than previously. Families who cannot access social housing, and have to rent privately, have also seen their situation worsen over the last two years.
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The research shows that compared to the rest of the UK:
- A minimum budget for a single working-age adult is 56% higher in Inner London (up from 47% in the previous report) and 39% higher in Outer London (up from 35%). This is mostly influenced by the high costs of renting even the cheapest properties.
- A minimum budget for a couple with two children is 18% more in Inner London and 21% more in Outer London. This is influenced by the high cost of childcare. These figures are based on families having access to social housing, for those who do not and have to rent privately, the minimum budget is 54% higher in Inner London and 37% higher in Outer London.
- A minimum budget for a pensioner couple is 30% more in Inner London and 17% more in Outer London. This is driven by rent and the additional cost of social activities.
While 41% of Londoners overall fall below the Minimum Income Standard (MIS), this varies greatly across groups:
57% of children fall below the standard
This is over 1 million children. This rises to 83% of children in lone parent households.
39% of working-age adults are below MIS
Over 2 million adults.
27% pensioners do not meet the standard, compared with 15% in the UK as a whole
This represents 300,000 pensioners.
Increasing costs
Between April 2014 and April 2016 private rents are estimated to have risen twice as fast in London as elsewhere in Britain, 7.2% compared to 3.6%, and much faster for smaller properties towards the cheaper end of the market – these increased by around 15% in London, nearly four times the increase in the rest of the UK.
In the same period, the cost of a nursery place for a child over two rose by 8.6% in London and 5.7% in the rest of the country.
Public transport fares increased by 2.5% in 2015 and less than 1% in 2016, more slowly than previously, but still ahead of inflation. Travelcard fares rose somewhat faster than average fares. Meanwhile there has been severe pressure on services, as local authority budgets continue to be squeezed, and London Councils forecast a £2 billion ‘funding gap’ by 2020.
As well as the higher price of housing, childcare and public transport in London, costs are also influenced by how Londoners live. For example, people living in London said they do not need cars but they do need access to the underground (not just buses) which is more expensive than public transport elsewhere. Housing requirements are also different, with people accepting smaller spaces as the minimum in London. For example, a flat (which may not have outdoor space) is the minimum acceptable standard for a family in London, whereas a house is the minimum in the rest of the UK.
For a single person to reach the Minimum Income Standard in Outer London they would need to earn at least £20,600 if they were sharing a flat; if they lived in a rented (lower quartile rent) studio flat it would be £25,691. The equivalent for Inner London is £21,700 in shared accommodation and £29,633 living in a studio.
Bigger holes in the safety net
At the same time as costs increasing, there have been a number of changes in support that have particularly affected Londoners, such as the cap on tax credit for childcare, the overall benefits cap and the freezing of Local Housing Allowance.
Solutions
Something can and must be done about this. To help ensure more Londoners can reach a decent standard of living a two-pronged approach is needed; on the one hand bringing down costs and on the other, improving incomes through better wages, supported by adequate in-work benefits.
The fact that rent alone can wipe out gains from the earnings increase represented by the National Living Wage underlines why tackling high costs is at least as important as addressing low pay in London.
Commenting, Matt Padley from the Centre for Research in Social Policy at Loughborough University said:
“This research is based on asking Londoners to look in detail at what is needed to lead a decent life. The findings can help policymakers explore the impact of particular costs in London. For example, people may say a rent is unaffordable to someone on a particular income but what does that mean? You need to know how much people need, after paying their rent, to afford the other basics of life. This research provides those figures. What it clearly shows is that in the capital it costs more to have a minimum decent standard of living – driven largely by higher rents, more expensive childcare and the higher cost of transport. It costs around 20% more for families with children to reach this standard in London, but can increase to over 50% in Inner London if families don’t have access to social housing and have to rent privately. This is why action like the Mayor’s commitment to provide more affordable housing is so desperately needed.”
Matt Padley, Centre for Research in Social Policy, Loughborough University
“This research shows that four in ten Londoners have less than they need for a decent standard of living. That’s 3.5 million Londoners who are at best just about managing to get by, and at worst, not managing at all. The problem is particularly acute for single working-age Londoners whose costs are around 50% higher than if they lived outside the capital. Whilst the National Living Wage provided a welcome boost to incomes, this was outweighed by huge increases in private rents, particularly in properties at the cheapest end of the market. These increased by around 15% over the last two years, about four times the rate outside of London. We need a two-pronged approach which increases incomes and tackles costs. On incomes, we need more employers paying a London Living Wage, joining the thousands of accredited employers who already pay it. We need welfare benefits which provide more of a safety net for those who can’t manage. And we need action on costs, especially more genuinely affordable housing that is closely linked to the living wage.”
Mubin Haq, Director of Policy and Grants at Trust for London
This article was published 13 March 2017. For more up-to-date information go here.