Even before COVID-19 hit, financially vulnerable residents in London were facing lower living standards and higher costs of living. New data collected and modelled for Policy in Practice’s Living Standards Index for London shows that, though April’s COVID-19 benefits boost gave extra support to low-income Londoners, many were already over-exposed to the financial effects of the pandemic because of welfare reforms.
In this blog post we reveal the latest findings from our data-led investigation into the causes and consequences of poverty in London.
Seven new findings about financially vulnerable residents in London
- Londoners are poorer. Almost a quarter of working-age low-income London households (24.4% of those tracked) were facing a cash shortfall in 2019, up from 15.7% in 2016.
- Welfare reforms made people poorer. 39% of working-age households who were affected by at least one of five main welfare reforms were financially vulnerable, compared to just 17% among those not impacted by any of these reforms.
- Universal Credit and the LHA rate had a negative impact before the pandemic. Close to half (44%) of households on Universal Credit could no longer make ends meet by August 2019, while two-fifths (40%) of households impacted by the Local Housing Allowance were in cash shortfall.
- More families with children are poorer. Almost two-thirds (61%) of families with children were worse-off after household costs by 2019 than they were in 2016. As a result, the proportion of families with children facing a cash shortfall had doubled from 11% to 23%. It is estimated that across London this could equate to 229,000 children living in households that could not make ends meet.
- The COVID-19 welfare support helped some. As a result of April 2020’s welfare reforms, the average working-age low-income London household’s disposable income has been boosted by £85. This has meant an extra 6% of London’s pre-existing working-age low-income households can make ends meet.
- The new LHA increase has helped some private renters. 20% of private tenants who previously saw restrictions in housing support will no longer have their housing-related benefits restricted as a result of the increases to the Local Housing Allowance introduced in April 2020. Among those who are still impacted, their disposable income will increase by £172, moving them on average from a significant cash shortfall (-£140) to a small surplus of £33.
- The benefit cap stopped some households from getting COVID-19 welfare support. However, the benefit cap is still preventing some financially vulnerable Londoners from fully benefiting from the April reforms. Those who were already capped received no additional support and have an average cash shortfall of over £400, while those who are newly capped received some boost in income but remain with an average cash shortfall of £284.
Policy in Practice’s Low-Income Londoners project is supported by Trust for London, and to date 20 London Boroughs have collaborated to learn more about the capital’s poorest residents. By pooling their data, the councils have enabled analysis of around 20 million data records in four years, covering over 750,000 low-income households in the capital.
Councils can boost COVID-19 recovery with real-time data insights
For the first time, councils have access to real-time monthly updates on living standards thanks to Innovate UK funding secured by Policy in Practice. These data insights will support councils with their economic and social recovery plans and help them to tackle local poverty faster.
With so much economic uncertainty on the horizon, and looking forward to 2021, councils will want to proactively identify and support the most vulnerable households. The real-time monthly insights will mean predicting council finances and preparing action plans can be informed by data, and the impact evidenced and tracked over time.
The funding from the UK’s innovation agency will enable faster data insights by automating the process. Data will be able to be processed on a monthly basis, rather than quarterly, and the processing time will increase greatly in speed, shortening from six weeks to under six days.
Ask us about real-time monthly data insights
Housing affordability revealed in updated Living Standards Index for London
The Living Standards Index for London has been refreshed with new data from councils across London showing the latest financial resilience of Londoners and the impact of the transition to Universal Credit. In addition, a brand new indicator of housing affordability has been added.
Our analysis on housing affordability found that 71% of low-income households who are renters pay more than 30% of their income on rent. This figure ranged from 55% in Tower Hamlets, to 88% in Enfield.
The borough differences are partially driven by the different types of rental in each borough. Residents who are private renters spend more of their income on rent than residents living in a socially rented property. Households in the private rented sector spend an average of 51% of their income on rent, compared to 32% in the socially rented sector. Much of this is due to the LHA rates in 2019, which were used in the current models. We hope to update our analysis to reflect the temporary increases to the LHA rate in April.
Better information means councils can target support to residents before problems happen
By pooling datasets councils in London are leading the way to understand more about poverty across a region. Our unique data-led research has found that working-age low-income Londoners have become more financially vulnerable and the drop in living standards meant many were not prepared for the financial impact of COVID-19.
Proactively identifying and targeting support to people who need help the most has never been more important. Thanks to further funding from Trust for London, councils in the capital can continue to learn more about financially vulnerable residents in London. Find out which London Boroughs are taking part and join our next phase of analysis here.
Outside of the capital, all councils across the UK can benefit from new Innovate UK funding secured by Policy in Practice to get real-time monthly data insights. These insights will help councils better understand what’s happening with the living standards in their local area, to target support where and when it’s most needed. Find out how to get real-time monthly updates here.
Data-led insights will help councils build the financial resilience of residents and model how future living standards will change. This information will go a very long way to helping councils avoid costs and residents in crisis.