The Cost of Living Crisis and its Impact on Working Families

Barbara Mettle-Olympio

The cost-of-living crisis is an escalating issue across the UK, with more working families feeling the pinch as they struggle to manage rising expenses. This situation has brought the role of state benefits, particularly Universal Credit (UC), into sharper focus. Many working families now rely on these benefits to make ends meet, challenging the outdated notion that benefits are solely for the unemployed or disabled. 

According to a report by the Joseph Rowntree Foundation, nearly 40% of Universal Credit claimants are employed. This underscores the significant number of working individuals and families who depend on state assistance due to inadequate wages and rising living costs. This shift highlights a crucial aspect of the modern workforce: that employment does not necessarily equate to financial security. 

In this article, we explore the impact of rising living costs on working families traditionally seen as financially stable; the misconceptions surrounding Universal Credit, and the critical role landlords can play in helping alleviate the strain. 

The rising living costs in the UK

The cost of living in England has been climbing steadily, driven by several key factors:

  • Housing Costs 
    The price of buying and renting homes has soared due in part to economic factors such as interest rate rises and supply and demand issues. In cities like London, high demand and limited supply drive up prices, making affordable housing increasingly challenging. The ONS reported a 6.2% increase in average rents 12 months to January 2024 in the UK, with London having the highest annual percentage change in private rental prices at 6.9% due to tenant demand. This supply squeeze, along with a lack of social housing, forces more families into the private rental sector, facing higher costs and less security. 

  • Utility Bills 
    Energy costs have risen significantly, placing additional strain on household budgets. The ONS found that 49% of bill payers reporting that they struggled to afford payments. This sharp rise in energy costs is due to a combination of factors, including increased global demand, geopolitical tensions affecting supply chains, and reduced production capacity. Families are facing higher bills for electricity, gas, and water, making it more challenging to manage their monthly expenses. For many households, this means having to make difficult choices, such as cutting back on other essential spending or prioritising heating over other utilities during colder months. 

  • Food Prices 
    The cost of food has also seen substantial increases due to supply chain disruptions and higher production costs. The Food Foundation reports that the price of essential food items has risen by 6.7% over the past year. This further exacerbates the cost-of-living crisis for many households. If the cost of these essentials rise, even by a small increase, they can have a substantial effect on their overall financial stability, forcing many families to make difficult choices, such as cutting back on nutritious foods or other necessities to balance their budgets. 
     
  • Stagnant Wages 
    Overall, these factors are have been intensified by the fact that wages have not kept up with rising expenses. The ONS reports that while inflation has surged, wages have remained relatively stagnant, reducing the real income of many households. This disconnect between wages and living costs means that even those in full-time employment may struggle to cover basic expenses, including rent. 

Misconceptions About Universal Credit Claimants

For landlords, this shift necessitates a re-evaluation of their tenant criteria. The traditional preference for full-time employed tenants doesn’t necessarily guarantee the financial security it once did, and despite the increasing reliance on UC among working families, there is still a prevalent misconception among landlords that UC recipients are unreliable tenants. 

However, the current economic conditions challenge this notion. Furthermore, the rise of gig economy jobs, zero-hour contracts, and part-time employment means that many workers do not have the stability or income levels traditionally associated with full-time work. Some face under-employment, wanting to work more hours than is available to them.

By adapting to these new economic realities and fostering a supportive rental environment, landlords can play a pivotal role in alleviating some of the pressures caused by the cost-of-living crisis. This approach not only benefits tenants but also contributes to the overall stability and health of the rental market.  

Useful Sources