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London’s Poverty Profile 2015

Author: Hannah Aldridge, New Policy Institute, Theo Barry Born, New Policy Institute, Adam Tinson, New Policy Institute, Tom MacInnes, New Policy Institute

Huge rise in number of working families in poverty. Number of children in poverty in London’s private rented sector doubles in ten years

  • 27% of Londoners in poverty versus 20% in rest of England
  • 1.2 million Londoners in poverty live in a working family – up 70% in decade

These are some of the striking findings in the fifth edition of London’s Poverty Profile – an independent analysis of around 80 poverty and inequality indicators.

The report by New Policy Institute, funded by independent charity Trust for London, looks at the role of income, inequality, housing, work, and education in the capital. It shows how things have changed within London over time, and compares this with the rest of the country.

This is the first report in the series to show a number of indicators starting to move in the right direction in London, with:

  • The number of unemployed adults at its lowest level since 2008 at just over 300,000.
  • The number of workless households at a 20-year low – now below 10% of working-age households.

Out-of-work benefit claims have fallen sharply – from a post-recession peak of 690,000 to 525,000 – faster than the rest of England average.

However, improving employment prospects alone have not been enough to lift people out of poverty in the capital. The number of low paid jobs is up for the 5th consecutive year in London, with almost 1 in 5 jobs paid below the London Living Wage.

Low pay is part of the reason in-work poverty is rising in the capital. 1.2 million Londoners in poverty live in a working family, up 70% over the last decade. This means the majority of people in poverty in London are in a working family.

The number of temporary and involuntary temporary contracts is at a ten year high in London – these contract types have increased more quickly in the capital than the rest of England.

In the previous 4 editions of this report, a key driver of poverty in London has been the cost of housing, this is still the case. Worryingly, the problem is not getting any better. The poverty rate in London is 27%, seven percentage points higher than the rest of England and the high cost of housing in London is an important factor in its higher poverty rate.

The private rented sector is an emerging problem, which needs urgent attention. At 860,000 there are more private renters in poverty in London than social renters or owners. A decade ago it was the least common tenure among those in poverty. And this shift is not confined to working-age adults/generation rent: the number of children in poverty in private rented housing has more than doubled in ten years to reach 260,000.

It’s not surprising that there has been such a sharp increase in private rented poverty in London. Rents have increased by 19% in London in the last five years (compared to 11% in England) making the average private rent £1,600 per month (more than double the £770 average in England).

One of the solutions to the problem is to build more affordable housing. However, the targets set for affordable housing in London keep being missed, with the latest target being missed by 40% – a net increase of 7,700 affordable homes a year compared with a target of 13,200.

With a shortage of affordable housing, the only option for low-income households is private renting. For the very poorest, it can be a gateway to homelessness: almost all the rise in homelessness acceptances in the last five years have been due to the end of a private tenancy. Whilst the number of rough sleepers is now at its highest since data has been collected – standing at 7,580 people.

On a London-level, poverty continues to move from Inner to Outer London.

However, for the first time, Western boroughs such as Brent and Ealing are facing much greater pressures, whilst Inner London boroughs in the East are improving; Tower Hamlets and Newham were among the boroughs with the highest levels of benefit claimants in the first report, and now sit mid-table.

The introduction of the ‘national living wage’ is welcome but our analysis shows that at the same time, planned cuts to in-work tax credits in April 2016 are likely to affect 640,000 children in London.

London also contains almost half of the families currently affected by the overall benefit cap at 10,500 families, including 2,400 losing more than £100 per week. Our analysis shows that if the cap is lowered as planned, they will lose another £58 a week and a further 20,000 families will be affected.

“When people talk about ‘generation rent’ they normally think of young working adults unable to save a deposit. But the 260,000 children growing up in private rented poverty are at the sharp end of London’s housing crisis – living in expensive, often low quality homes, without long-term security. ‘Affordable’ starter homes at £450,000 won’t solve this problem – London needs investment in more housing suitable for a range of families and incomes, and it needs greater powers to ensure private accommodation is of a good standard.”

Hannah Aldridge, New Policy Institute

“A record number of Londoners are in work, yet this has had little impact on the numbers living in poverty in the capital. Over two million are on a low income in London, with an increasing number in working families. On too many occasions work doesn’t pay enough, leaving people living in precarious situations. Whilst the national living wage is welcome, it falls well short of what is needed to live on and the proposed 2020 rate is already below the London Living Wage of £9.15 per hour. Action is also needed on costs, particularly in relation to housing. The numbers of affordable homes being built is a fraction of what is needed. There is no shortage of solutions to these problems. We can tackle them if there is the political will and drive to ensure London is a city for all and not just the wealthiest. With the Mayoral Election next year, there is a great opportunity to make London fairer.”

Mubin Haq, Director of Policy and Grants at Trust for London


21 October 2015

London’s Poverty Profile 2015