The headline “I’m constantly worried about being evicted” on BBC News last month captured our attention at Registry Trust, as the article highlighted that 10% of renters were behind on rent and renters were in approximately £360 million of debt.
The Joseph Rowntree Foundation (JRF) also expressed their concern. They believe that greater investment is needed in the social renting sector to relieve the multitude of households on low incomes from paying rental prices they cannot afford. JRF state that almost one million households are paying rent they cannot afford, with 90% of those households being in poverty.
Registry Trust maintains the Register of Judgments, Orders, and Fines for the UK & Ireland, allowing us to monitor up-to-the-minute levels of indebtedness and financial vulnerability on an ongoing basis. Our data enables us to cross-analyse datasets to gain a wider understanding of regional-level indebtedness.
This blog cross analyses our County Court Judgment (CCJ) debt data with data on household income (GDHI), and median rent prices. The income variable was divided by 12 to account for monthly income. City of London was removed from analysis due to its sparse population.
1.As household income (GDHI per head) increases, so does the median value of rent in English Local Authorities
According to our analysis, as a household’s income increases, the average value of rent in their area increases too. The anomaly to the far right of the diagram below is Kensington & Chelsea, which experienced extremely high monthly income and rental costs. The more central anomaly is Westminster, where the median rent is just £43 less than Kensington & Chelsea, and median monthly income is almost £3,000 less.
2.As monthly income increases, the number of CCJs decreases
It may be reasonable to expect that, as a household increases its ‘disposable’ income each month, the likelihood of its residents being in debt, especially have an outstanding CCJ, decreases. Again, Kensington & Chelsea appears on the far right of the diagram below and Westminster in the centre as anomalies.
3.Households in areas with a high % of rent payment in relation to their incomes have high rates of CCJ debt
To estimate the percentage of GDHI that is likely spent on rent, we calculated the median value of rent as a percentage of monthly GDHI per head for each area. The aim was to see if residents in Local Authorities who spent a larger percentage of their income on rent, had higher rates of indebtedness.
This appeared to be the case. The graph below shows that, as households spend a larger percentage of this income on rent, rates of CCJs increase too.
When we consider the recent £20-per-week reduction in Universal Credit, it is likely that households in areas with high rent costs but low incomes will be most negatively impacted by the two-fold issue of increasing living expenses and reduction in income, and are therefore more likely to enter or continue further into a state of debt.
4.Local Authority areas in London are most likely to see high rent costs in relation to household income
The 30 Local Authority areas where households spend the highest and lowest percentage of their income on rent is detailed in the table below. Those in London are most likely to have high rent costs in relation to household income, with Newham topping the table at 7.71%, followed by Hackney at 7.11%, and Barking and Dagenham at 6.94%.
Local Authorities with the lowest cost of rent relative to incomes are Northumberland at 2.35%, Derby Dales at 2.35%, and Ribble Valley at 2.40%.
5.Local Authorities with a high number of rented homes do not positively correlate with high rates of indebtedness
What proved unexpected from the analysis was that there wasn’t a correlation between high numbers of rented homes and high rates of CCJ debt. As renters tend to be more financially vulnerable, particularly in areas where monthly rent prices are high but monthly income is low, this is a surprise.
However, the data analysed in this blog varied from 2018 to 2020 therefore it is possible this relationship could change into 2021. This is particularly a possibility as we see the full impact of the global pandemic on personal finances, exacerbated by the £20-per-month reduction in Universal Credit, which was relied on by many already financially vulnerable households who experience high rent costs and low disposable income and are therefore likely to see increasing debt due to an inability to repay owed money.
Find out more about uses of our data and working with us in our downloadable e-brochure here.
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