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London's Poverty Profile 2017

Author: Adam Tinson, New Policy Institute, New Policy Institute, Trust for London

The latest data for London's Poverty Profile (from 2016 and 2017) shows a mixed picture in London. In some ways, London is better off than it was before the financial crisis. Employment rates are at their peak, at least as far back as 1992, at over 73% of the working-age population. This is 4.5 percentage points higher than a decade earlier. This also translates to a record low in the number of workless households in London. However, while the overall poverty rate has fallen slightly in recent years, it remains higher than the rest of the country; and the proportion living in 'deep poverty' has increased.

The proportion of Londoners living in poverty after housing costs are taken into account has fallen from 29% to 27% over the last six years. Due to population growth, the number of people in poverty remains unchanged at 2.3 million. In the rest of England, the figure is 21%. The cost of housing is the main factor explaining London’s higher poverty rate.

700,000 children, 1.4 million working-age adults and 200,000 pensioners in London are in poverty. That is 37% of all children, 24% of all working-age adults, and 19% of all pensioners.

There are people in poverty in every London borough. Every borough has areas where the poverty rate is above the rest of England average.

While the poverty rate has fallen over the last few years, the depth of poverty has been increasing, with the proportion of households whose income is below 50% of median income (rather than 60% - official poverty measure) rising by 1.5 percentage points in the last five years (some 130,000 people).               

You can find out more about poverty in London in the data section of this website.

Wealth inequality, which is higher than income inequality, is also a significant issue in London. The bottom 50% of London households own just over 5% of London’s wealth, whereas the top 10% owns over half.

The amount of wealth held by the bottom tenth of households fell by one third in London between 2010–12 and 2012–14, whereas in Great Britain it fell by just 2%. Someone just in the top 10% saw their wealth grow by 25% in London over the same period. In Great Britain it was 15%.

This means that in London, wealth for someone just in the top 10% is now 295 times higher than someone just in the bottom 10%. In 2010–12 it was 160 times higher – a huge increase.

The fall in London’s poverty rate has occurred alongside record employment levels. The number of unemployed people in London fell to 280,000 in 2016, down from a peak in 2011 at 430,000.

Yet for the majority of the 2.3 million Londoners in poverty, work is not enough to help them avoid financial struggle. The majority of people living in poverty (58%) are living in a working family, the highest this figure has ever been. This figure was 44% a decade earlier and 28% two decades ago. Around 70% of children in poverty in London are in a working family. In the rest of England 55% of people in poverty are in working familes.

In addition, for many, work has become less stable. In 2016, the number of workers in London on temporary contracts was at an all-time high at 260,000 with one in three (33%) on a temporary contract wanting a permanent one, this is still above pre-recession levels of around one in four.

London’s high levels of poverty relative to the rest of England are largely explained by high housing costs.

Private rents in London are more than twice the average for England. A two-bedroom home to rent in London at the cheapest quarter of the market costs £1,250 a month, compared with £500 for England. The growth in private rents over the past five years has also been faster in London: 20% compared with an average across England of 8%. The cheapest fifth of rents have increased faster than private rents overall.

Social rents have also grown significantly over the last five years. Rents for local authority social housing have increased by around 30% in London and England. Housing association rents have increased 26% in London and 19% across England. Over this time, the number of London children living in the social rented sector who are in poverty has started to increase again - up 40,000 to 290,000.

There are a number of solutions to the housing problem but so far not enough has been done. Only 24% of new housing completions were affordable homes in London in the three years to 2015/16. This is a decline on the three years to 2013/14, when a third (34%) of all home completions were affordable. The net increase of 6,700 affordable homes in London in 2015/16 is almost 40% short of the 17,000 target set in the Mayor’s 2011 London Plan.

Explore all our data on housing in London. 

Despite record levels of Londoners in work, poverty rates have only nudged down slightly over the last few years. Over two million Londoners are struggling to make ends meet. That’s more than the entire populations of Manchester, Liverpool, Bristol and Newcastle combined. The reality remains, that for many work does not pay enough, or offer the security that people need. We need more action to increase wages and improve good work standards if poverty is to further reduce. “London also remains highly unequal, home to many billionaires as well as millions who are struggling to make ends meet. On the plus side, income inequality has reduced over the last five years, though the gap is still huge. In relation to wealth, inequality has grown significantly. The wealth for someone just in the top 10% is 295 times higher than someone just in the bottom 10%. A few years earlier it was 160 times higher. This means the bottom half of Londoners just own 5% on all the wealth, whereas the top 10% own over half.

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

Despite its glaring prosperity and privilege, London remains the capital of English poverty, due mainly to the high rents paid by the half of all households who rent their homes. Those who rent from a private landlord have long faced high rents. More recently, housing association and council tenants have seen their rents go up rapidly. Poverty in London is not just a surprise for the rest of England. For example, large and leafy outer London boroughs like Bromley and Barnet actually have more residents living in poverty than higher profile inner ones like Kensington and Chelsea. And as this report shows, it is often these outer boroughs where other disadvantages associated with being poor, for example, lower levels of educational attainment on average, are at their greatest.

Adam Tinson, Senior Researcher and lead author of the report, New Policy Institute


08 October 2017

London's Poverty Profile 2017