With the Labour government nearly two years into its five-year term, we thought it would be a good time to mark their performance so far on housing and the cost-of-living. And who better to compile the report than Lindsay Judge, Research Director at leading think-tank the Resolution Foundation. Jon Land asks the questions.

Jon Land (JL): Based on your research, just how bad is it out there currently?

Lindsay Judge (LJ): That’s a big question, isn’t it? But let me try and break it down into pieces. The first thing to say is obviously the last 15 years has been absolutely dismal for living standards for just about everyone. But, of course, if you’re at the lower end of the income distribution, it feels worse than it does if you’re at the top end.

If we want to be a little bit more positive, we can look forward to this fiscal year (2026-27), there’s actually a little bit of a turning point for low-income people. And there’s two – potentially three – things driving that.

The first is that unemployment is relatively low. It’s not so much for young people, but I mean, on the whole, we have a fairly buoyant employment rate in the UK. And over the last 15 years, that’s been the sort of positive story in that lots of people who we would have previously classed as marginal in the labour market, have found work.

The next positive part of the story is that the National Minimum Wage is still on an upward trajectory. And there’s a fairly hefty increase this year of 4.1%.

There’s also the gradual convergence of youth rates with the adult rates. So, that’s good for young people.

And then the third thing is that there’s obviously some progress on benefits this year. I do think we shouldn’t underplay this. This is a real turning point in that we’ve got the uprating of Universal Credit standard allowance for the first time in 15 years.

And let’s not forget the 500,000 children who live in households which were hit by the two-child benefit cap and that’s obviously been scrapped. So, there have been some good policy choices that have been made that are about supporting incomes of those at the bottom.

So, that’s a good news nugget in what’s generally a broader story of misery. If you look at the cost side, you’ve got really challenging downward pressures.

“We’ve done a fair amount of research on housing quality and the social rented sector is, amazingly, considering the horror stories you hear quite regularly, the best performing tenure”

The first one to highlight is council tax and we know that bills are going up by 5% this year. Council tax is a regressive tax in that it hits those at the bottom more than the top. And that’s really serious, I think. When we’ve done qualitative work in the past, it’s surprising how much people point to council tax as a bill that really causes them a lot of distress, not least because they often don’t feel they’re getting good value for money from it.

Obviously, we’ve also got the war in the Middle East, and that’s brought huge uncertainty to the outlook. The two items in the costs basket that we think it’s most likely to affect are obviously energy and, in the longer term, food prices.

With energy, in the short term, you might say it doesn’t really matter because we’re going into summer and we’ve got the price cap, which will be in place until July. But I think it’s undoubtable that the price cap will need to move up in July. And, of course, we’re all looking to the autumn.

On food prices, we need to consider two things. One is that it’s spring. So, if you’re a farmer in the northern hemisphere, you’re planting your crops and you’re wanting to put fertiliser on them. And we know that fertiliser is obviously in short supply. But the second thing we know from looking at the past evidence is that it takes time for the increases to come through. So, we may not see food prices going up this year, but we may see it next year.

It’s worth noting that energy and food make up a bigger share of a lower income household’s consumption basket than it does for a higher income person. So, those two things really matter for low-income families.

I think there’ll be a big debate going into the autumn budget about whether there’s more that the government needs to do for low-income families. Anyway, I told you this is a complicated question. I haven’t even mentioned housing yet!

JL: How does housing tie into all of this?

LJ: We all know that housing is the biggest consumption item that almost every household has. I mean, that may not be true if you own your home outright, but largely speaking, for the majority of the population, it’s the number one biggest expense. And it’s obviously the expense we all prioritise because if you don’t pay your housing costs, you become homeless.

We know that rents of both stripes, social and private, are still increasing above inflation rates. With social rents, that’s policy-driven with the CPI plus 1% increase every year. With private rents, it’s just a function of the market. And I’m sure you’ve seen the charts that we and others draw that show this really incredible spike in private rental inflation coming out of Covid, which endured for quite a long time, I think, probably because it takes a long time for tenancies to turn over.

We’re now seeing that come back down a bit and begin to stabilise, but it’s clear that private rents have been outpacing prices overall for a significant period of time. And again, if you’re focusing on lower-income families, someone might say, well, it doesn’t really matter because they get housing benefit or the housing element of Universal Credit. And that’s true. But we also know there’s a significant share of social renters who aren’t in receipt of housing benefit.

“You can think of shared ownership as being a way of buying yourself a permanent social rent tenancy. That sort of aligns with the fact that we don’t see many people staircasing. In some ways, it’s a way of just ensuring yourself a good home for however long you want to stay in it”

At the Resolution Foundation, it’s the private renters that we particularly worry about from a living standards point of view, because local housing allowance (LHA) remains frozen at the October 2024 rate and rents have increased much faster since that point of re-pegging. In fact, we’re close to the point where rents have diverged away from the peg to such an extent that it’s becoming untenable.

But, of course, that’s the average, right? And we know that housing markets are local and that means there are people in particular areas who are really at the sharp end of that.

For as long as I’ve worked at Resolution Foundation, housing costs have been such a drag on living standards. We see that over and over again, even when we’ve got periods of income growth because wages just can’t keep up. It leaves people chasing their tails because of their housing costs.

I know your interest isn’t in homeowners, but we shouldn’t forget all the people who’ve got mortgages who are looking down the barrel of a gun with rising interest rates again. So, there’s no doubt housing costs are a huge stress for people generally.

We did a really interesting piece of work a couple of years ago, looking at how our housing costs compare to other countries on a like-for-like basis. So, we were looking at the cost per square metre and other factors. And the UK really stands as an outlier. It’s clear that lots of other countries have problems with their housing markets and experience lots of the same issues that we experience in the UK, but on a cost basis, we do seem atypical.

JL: Do you think social landlords could be doing more to support their tenants?

LJ: It’s not something we’ve done a lot of research on. But I do spend quite a lot of time with people who are running employment support programmes via housing associations. What’s interesting is that as a housing association you have two things at your fingertips. One is you’ve got an easy way to communicate with people – you should know your residents, you know people’s addresses, you have contact with them for other reasons too. And the second thing is that kind of capacity to work and build relationships in a small geographic area. And we know that both of those things are really important, particularly in employment support practice but wider support as well.

So, I think housing associations sit in the kind of privileged position potentially for delivering effective employment support. And there’s obviously lots of examples where they do great work in this area. I think there’s two caveats I would make, and again, not necessarily from our research, but from just observation.

I remember I was presenting at the board of a housing association once and then had the privilege of sitting and listening to the rest of the meeting. People were talking about their employment support programmes and their benefit support programmes and their debt reduction programmes, etc. And one member of the board said, “isn’t our raison d’etre to build houses?”. So, I think there’s that tension about a housing association’s purpose. Is it to build houses or is to support people?

JL: That leads me on to your thoughts on social housing progress generally, particularly under the current Labour government. How do you feel things are going in terms of delivery, legislation and regulation?

LJ: Well, it’s going to be one of those reports with multiple pages. I’d give them reasonably close to top marks on putting their money where the mouth is. So, obviously the funding of the affordable homes programme with the £39 billion was really welcome.

We’ve got a chart that shows that’s the highest annual spend on subsidised housing since, I think, 2011-2012. It’s not quite back up to those levels, but it’s getting there.

And I think that that recognition is important, especially in fiscally constrained times.

Alongside that, there was the commitment, which I know has been somewhat watered down in London, that 60% of the build would be social rent. Those two things feel important. And I think we should give credit where it’s due.

On the question around regulation and quality, we’ve done a fair amount of research on housing quality and the social rented sector is, amazingly, considering the horror stories you hear quite regularly, the best performing tenure.

Of course, that doesn’t excuse all these examples of appalling conditions and terrible health impacts that we hear about. But poor-quality housing is something the government is looking to address, and I do feel like their heart is in the right place.

They’ve seized the right policy issues. But change is hard to affect in a lot of these areas. And the devil is always going to be in the detail, isn’t it, about how you actually implement these things, how you follow through on them, how you adapt if they’re not working.

“At the Resolution Foundation, it’s the private renters that we particularly worry about from a living standards point of view, because local housing allowance (LHA) remains frozen at the October 2024 rate and rents have increased much faster since that point of re-pegging”

Take the Renters’ Rights Act. Our focus on that one has been more on the private renters than the social renter side, but the thing we’re really thinking about at the moment is how will local authorities be able to enforce the new provisions around the act? Because there’s no point in having something on the statute book if there’s no enforcement capacity. And there’s no point in having enforcement if there’s no capacity to rectify.

And I think that’s a statement that could be applied to the social rented sector too. I hear from people in the social rented sector about how challenging the post-Grenfell remediation programme has been and that’s obviously absorbed a lot of capacity.  I think we just have to be realistic about some of this stuff.

A lot of the issues in housing are very long term. And it’s about thinking, what does progress look like? I guess that leads me to the point that housing policy doesn’t work very well on a parliamentary timetable, does it? Because five years is nothing in the housing world. And it feels so important to create cross-party consensus around some programmes and some interventions. There’s got to be some kind of settlement on housing that endures across parliaments, because otherwise it’s just this constant ‘old wine in new bottles’ situation, where endless efforts to launch fancy new programmes are actually just old programmes dressed up.

JL: Which brings me nicely to shared ownership which, as you know, has been around across a number of different governments and parliamentary terms. But it’s a difficult tenure, isn’t it? It comes with its own problems, but it’s still in play and the government still trying to make it work.

LJ: Yes, it’s one of those things that on paper looks great, but the reality of it is often very different. I don’t need to tell you what the problems are, Jon, but we don’t see many people staircasing. It’s really challenging when you try to sell. People are stung by these service charges that they didn’t expect, and they’re often quite steep.

So, the gloss has come off it to a certain extent. But there’s clearly a segment of the population who it works for. Someone told me many years ago, which I found really interesting, is that you can think of shared ownership as being a way of buying yourself a permanent social rent tenancy. That sort of aligns with the fact that we don’t see many people staircasing. In some ways, it’s a way of just ensuring yourself a good home for however long you want to stay in it. Perhaps if we think about it and talk about it in those terms, it makes a bit more sense. It would also reframe how we market it.

I’d also revert back to the point about the 60% social rent commitment. It feels so different from previous governments where so much of the housing spend, if not all of it, was on shared ownership and affordable rent.

Despite the criticism, it feels like the right thing to carry on with shared ownership as part of the tenure mix. And in some cases, it also helps housing associations balance the books. But I don’t think history will show that shared ownership has proven to be a silver bullet!

JL: The Resolution Foundation has recently done some research on housing affordability that suggested there was a link to people’s decisions around raising a family. Can you tell us about that?

LJ: That piece of work was looking at declining fertility rates overall, and the reasons behind it.  One of the main ones is that so many more women go into higher education these days, and we know that that defers the decision to have a baby. But housing has also been problematic. We were quite careful with our words in this report, because it tends to be more qualitative evidence, that people think having a stable home, an independent home, is a priority before they have children.

But, then, I always think about my parents who married in the 1960s. The idea of having their own home was a pipe dream really but they still had children. And people do have children regardless of where they live, so we have to be a bit careful of making a direct link.

But it was certainly the case that when we looked at the number of young people who are still living with their parents, which, of course, has gone up quite considerably over time, it could potentially be an element of that declining birth rate.

I’m going to read you what the report said: “The number of non-graduates (and that’s important because that’s what the study focused on) who haven’t gone to university, in their mid to late 20s, living with parents has doubled over the last 25 years. This might pose a significant barrier to starting a family. Of the overall rise in the proportion of non-graduate women in their late 20s without a dependent child over the past decade, two-fifths is associated with the shift of living with parents.” It’s kind of logical, isn’t it?

We’ve done some work in the past showing how difficult it is to get on the housing ladder as a single person today and how having two incomes is really important. But living independently is a part of the young adulthood experience. So, coupling up and living together is a key marker in the life course and it’s happening later. And obviously this is important in terms of creating a family. I’m picking my words carefully here!

It’s worth saying that the number of families with dependent children living in the private rented sector has increased massively over time. And it’s one of the reasons why it needs to be reformed so that it’s not just regarded as a transitory tenure. For lots of people, it’s probably the tenure that they’re going to live in for all of their lives. Currently, it’s less than ideal to be a child in the private rented sector.

JL: In terms of housing and the cost of living. What policies would the Resolution Foundation like to see?

LJ: Our number one ask on housing at the moment is to relink LHA to actual rents and make that a stable settlement. We wrote a paper last year which pointed out that, in the Treasury and OBR figures, Universal Credit would be uprated every year. So, when that happens, it’s not a spend, it’s just an assumption. Currently, the assumption embedded on LHA at the moment is that it will be frozen. So, when it’s uprated, it’s classed as a spend. And I think that’s really problematic. We’ll definitely be pushing for changes on that in the run up to the budget.

We were delighted about the two-child cap being removed. But we should remember the benefit cap is still in place and it isn’t uprated very often. That becomes more painful for families affected by it and draws more people into it over time. It’s an irrational policy and very damaging for lots of people.

What else? We did a piece of work that showed how housebuilding is critical for growth – but in two ways. It creates a lot of jobs, and it generates value in the economy, but it’s also important in terms of getting the economy going, especially in places outside of London. We want Birmingham, we want Manchester, we want Leeds to be successful cities. And some of the problems that they have around housing is the need for a bigger workforce. You want to build at scale in the right places – but how do we do that?

One of the questions we’re puzzling about is whether it’s plausible to expect the private sector to deliver the homes we need? Completely rationally, housebuilders are companies, they’re not charities, and build out to an absorption point and then they stop building and then and they build somewhere else. I don’t think we should kick them for that because they have a board to report to and they are profit maximisers and that’s their nature. But if that’s the case, can we expect them to kind of ratchet up to the levels that are required to hit the 300,000 a year target?

I think there’s two potential answers. One is, yes, they could build better and bigger and faster. And the regulatory framework needs to change to try and ensure this happens. The other is, no, they can’t. They’re private sector companies, they’re price sensitive, they’re not going to take those risks, in which case the answer has got to be there needs to be more investment on the public housing side.

On housing quality, we did an interesting paper last year on housing and ethnicity and part of it looked at housing costs to income ratios. Lo and behold, every single ethnic minority group paid more of their income on housing than white British. But why is that? So, we went through the whole rigmarole of looking at whether they had better or bigger or higher quality houses. But no, they didn’t. We didn’t come up with a chapter and verse conclusion to the reasons, but we do think solving lots of these wider housing problems would have a disproportionately positive effect on ethnic minority families.

We’ve asked the housing select committee to carry out an investigation to see if the reasons behind it are discriminatory. Things like whether there’s a smaller pool of housing available to people from ethnic minorities and they end up having to pay over the odds? The committee was very interested in the report, but it hasn’t picked it up yet.

There’s no doubt that housing issues are widespread but certain groups are undoubtedly hit harder – young, old, ethnic minorities. These are the groups at the sharp end, and it feels like there should be real political energy from any government to try and address these problems.