Explaining the declined affordability of housing for low-income private renters across Western Europe

Abstract

The private rented sector (PRS) recently enjoyed a revival, in particular in the years before and after the Great Financial Crisis (GFC). At the same time however, affordability concerns have come to the fore. The main aim of this paper is to explain trends in housing affordability for lower-income households in the PRS across Western European countries, from a supply versus demand perspective. To this end we: (1) related trends in housing affordability to wider changes in housing systems, welfare regimes, demographic indicators and housing market financialisation; and (2) decomposed affordability trends in terms of rents and incomes, controlling for compositional shifts. We incorporated the spatial dimension by distinguishing between urban and rural regions. Although we could not explicitly test for the more fine-grained mechanisms relating housing market financialisation to increased ‘unaffordability’ of PRS-housing, our findings nevertheless warrant future research into this topic. In particular in countries with strong financialisation (Ireland, the Netherlands, Spain and Portugal) decreasing affordability arises from the fact that during the period 1995–2007 private rent increases were not compensated for sufficiently by income growth. We furthermore found that across urban regions, between 1995 and 2007, affordability worsened through demand pressure arising from in-migration. Changes after the GFC (up to 2013) were more limited and diverse.

The affordability of “affordable” housing in England: conditionality and exclusion in a context of welfare reform

“…However, as the article highlights, in the English context the shift to 'affordable' housing is at the expense of provision of housing at social rents, accessible to those on the lowest incomes. Left unchecked, there is the potential for a 'perfect storm' in which welfare reforms and austerity policies increasingly push those on the lowest incomes into the private rented sector, increasing demand at the margins (Dewilde, 2018). Whilst we have elaborated on policy recommendations elsewhere (Hickman et al, 2018), this article indicates that understanding the interaction of different policy spheres is crucial, as is future monitoring of housing access for marginalized groups.…”

“…Whilst the characteristics of housing systems vary markedly between and within countries, 'affordability of housing remains the fastest-growing and most pervasive housing challenge in Europe and North America' (Tsenkova & French, 2011, p. 27). Research has particularly focused on the unaffordability of homeownership for different groups (Aramburu, 2015;Bruce & Kelly, 2013 ), the rising proportion of households living long-term in the private rented sector (Clapham et al, 2014;Coulter, 2017), and associated affordability pressures (Bone & O'Reilly, 2010;Dewilde, 2018). Social housing has featured less prominently in affordability debates, perhaps because this housing is oriented towards those who are excluded from other markets, often through inability to pay.…”

Resurgent landlordism in a student city: urban dynamics of private rental growth

“…Following the logic of increasingly uneven capital flows, we would expect increased investment in private-rental housing at two very different types of locations: at peripheral locations with stagnant economies and a slumping demand for housing, as well as at central locations with flexible labor markets and (over-)heated housing markets. In the first group of locations, private rental growth is primarily associated with investment in more marginal housing focused on maximizing rental income from lower-income tenants with few alternative options (see Bailey, 2020;Dewilde, 2018). In the second group of locations, private rental is associated with a wealth investment for investors where building up the housing equity itself as a secure store of wealth is a key motivation, along generating rental income.…”

“…Furthermore, contemporary investment patterns build on top of existing geographies of private landlordism. These may be substantially different, as the private-rental stock of many Western cities also caters to lower-income and more precarious populations (Dewilde, 2018). These properties are traditionally obtained as rental investment to supplement limited pension incomes.…”

“…Concomitantly, increasing population shares pushed into rental alongside profit-maximizing by investor landlords is likely to push up rental costs, leading to affordability issues. In most European countries, rent increases in the private sector have far outpaced income growth in recent years (Dewilde, 2018). As highlighted above, these investments are associated with specific sociospatial patterns, potentially exacerbating spatial inequity.…”