Rising housing costs mean that it is the people with jobs and homes who are the next in line for the poverty trap


They are the New Poor of London. Not the workless family in the sink estate, as has been the enduring image of poverty. Instead, it is those people who work, rent a home, raise children and strive to get on who are caught in the trap.

There has been a wholesale shift from the Shameless to the strivers who are hampered by London’s twin forces – low wages and high housing costs.

The new reality is that a typical person trapped in poverty has a job. Some are working two or three. They might do a full day’s work then run a cab in the evening. They rarely see their children and rely on family to cover childcare.

Hannah Aldridge, a senior researcher at the New Policy Institute , who made a study of shifting poverty trends for the London Poverty Profile said: “We know the number of people in poverty hasn’t really changed, it has moved in line with population growth – but the type of people in poverty is very different.

“The rise of in-work poverty is partly a good news story. It’s not because worklessness is really easy and benefits are generous. It’s because there are far fewer workless households. Jobs growth in London has been really quite impressive.

“But moving from a workless family to a working family isn’t necessarily lifting people above the poverty line. Either they can’t find enough work, they’re low paid or they have high housing costs.”

And it is the high housing costs that are causing a lot of the damage. The loss of social housing and the high price of property means that the private rented sector is increasingly becoming the norm for established families.

Hannah said: “When you think of growth in the private rented sector you tend to think of young working adults who are quite dynamic but there has been a massive growth in the number children in the private rented sector in poverty.”

According to Joanna Kennedy, chief executive of poverty action charity Z2K : “The fundamental problem of poverty in London is high housing costs masked by things like calling an 80% of market rent ‘affordable’ which is absolute nonsense.”


Megan Jarvie, London poverty project coordinator of Child Poverty Action Group said: “We’re seeing a picture of parents moving into work but really struggling to meet their costs and not necessarily moving out of poverty.

“There are projections of child poverty time bomb over the next few years. By 2020 we’re going to see 200,000 more children falling into poverty in London unless the context changes.”

Hannah said: “In terms of in-work poverty, it is not necessarily the low-wage economy driving this. Because so many people living in the private rented sector, any increase in salaries is only going to work if you increase it at a faster rate than rent.”

So workers are turning to their employers to make up the difference between their wages and their housing costs. But employers are not always able to comply. Dr Kristian Niemietz, of the Institute of Economic Affairs , said: “Wages are determined by supply and demand in the labour market, not by people’s personal costs.

“You can tell you’re employer ‘I’m more productive I deserve a pay rise’ – that’s a reasonable argument. But you can’t tell your employer ‘I have higher rent now therefore you have to raise my salary’ because he’ll probably say ‘sorry that is not my fault’. The fact that you face higher bills doesn’t make your labour more valuable to an employer.”

Minister for employment Priti Patel with her boss, Secretary of State for Work and Pensions, Iain Duncan Smith

Assembly member Stephen Knight said: “Median wages have fallen in real terms by almost £4,500 in London since 2008, 12.5% in London compared with 9% nationally.

“There used to be a big London premium to reflect housing costs but that premium is falling despite the fact that rents are a lot more. I’m wondering if there is a group of people above the poverty threshold who are struggling and they are the next wave who will fall below the threshold when housing costs rise and wages don’t rise at the same rate.”

Hannah said: “Work doesn’t lift you out of poverty in London in the way that it does elsewhere in the country.”

Employment minister Priti Patel is guiding the Welfare Reform and Work Bill through Parliament. The Bill includes a provision for a benefit cap which will affect 30,000 people in London.

She said the Government was “moving this country to a high wage, low tax, low welfare economy”.

She said: “It is fundamental to our commitment to end child poverty and improve children’s life chances that work always pays more than a life on benefits and that support is focused on the most vulnerable.

“Work remains the best route out of poverty. Moving people into work, and helping their income grow once they are in work, is exactly our focus.”

Case study

Giselle Thompsett* is a working mother of three school-age children who lives in private rented accommodation in Newham.

She has two jobs – as a cleaner and a dinner lady – and works occasionally in a bar when she can arrange childcare.

She said: “I could work more hours but I want to be there to see my children off to school and be there when they come home.”

From her wages she sets aside her rent as a priority. Then she works through her “key bills” – gas, electricity and council tax. After that she calculates her food budget.

She manages to save enough to treat her children occasionally. “London is full of free things to do, like the Olympic Park,” she said. “But it’s always a tight squeeze every month.”

She does get some help from benefits but she’s not inclined to rely on the state – she was brought up to stand on her own two feet, she says – and, although times get tough, she’s not resentful. “There are always difficult choices,” she says “but I’m in this position because of decisions I made.”

Her greatest fears lie in housing insecurity. She couldn’t face a major rent hike and she dreads the prospect of moving to outer London out to, say Barking, where accommodation is cheaper but there are fewer chances.

“I can make it work, just about,” she says, “as long as there are no shocks. It’s a knife-edge mostly. But we do OK.”

*Not her real name


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