Poverty 'before' and 'after' housing costs
Key points
- The difference in poverty measured before and after housing costs is much greater in London than in other regions.
- Measuring poverty before housing costs distorts the picture for London because:
- Housing costs are non-negotiable – they must be met. Income after housing costs is therefore much the better proxy for a household's disposable income.
*Since Housing Benefit is treated as income, a rent rise causes Housing Benefit to go up which increases Before Housing Costs (BHC) income. The idea that a rise in rent can ever leave a tenant better off is a nonsense which has some perverse implications for policy. This problem does not arise with the After Housing Costs (AHC) measure. - London's higher rents mean that, if they receive Housing Benefit, otherwise identical families will have a higher BHC income if they live in London than if they live elsewhere. For example, if the rent were £10 a week higher in London than Newcastle, an unemployed man living in a rented London flat would be deemed to be £10 a week better off. Since the costs of other essential items are also higher in London, this is the opposite of the truth.
- Apart from this section, all measures of low income on this website are on an 'after housing costs' basis.
The proportion of people in low income households, before and after housing costs
Average weekly housing costs for households with below average incomes
What do these graphs show?
The two graphs illustrate the problems low income households in London face when housing costs are compared with other English regions.
According to the graph above, on the BHC measure the rate of low income in Inner London (18%) is lower than most other regions in England. The rate in Outer London (16%) is actually lower than the average figure for England.
However, on the AHC measure, Inner London has by far the highest proportion of people in low income households (30%), and Outer London the second highest (26%).
The graph below demonstrates the impact on people whose income is below the national average. The left-hand bar shows the average housing cost in each region before Housing Benefit is deducted. The right-hand bar shows the average housing cost after the deduction of Housing Benefit.
Both before and after deducting Housing Benefit, London households with below average incomes have significantly higher housing costs than households elsewhere in England. In the graph above, we have adjusted average housing costs for household size, using the same equivalisation approach we use for household income.
The difference between the two measures is much greater in London than elsewhere: average housing costs for this group in Inner London are about £80, and £50 after Housing Benefit. The difference in any region outside of London is never greater than £15. This means that Housing Benefit makes up a larger proportion of total 'income' for households in London than in other regions - although it is income households never actually see
Data used
Figurestaken from Households Below Average Income series, Department for Work and Pensions
Indicator last updated: 29 April 2010