The benefits time bomb awaiting Labour

Sir Keir Starmer faces a growing benefits bill if he fails to restore the dream of home ownership - Alastair Grant/AP

Rob Trewhella’s biggest worry ahead of his 68th birthday in August is that there will come a time when he is no longer able to work.

After he has paid for housing costs, he has £15 left of his state pension every month.

Two years ago, to make ends meet he decided to become a cab driver where he lives in Penzance, Cornwall.

“I absolutely love it. It’s wonderful because I’m meeting people from different walks of life, from different countries. I couldn’t wish for anything better,” he says.

Trewhella rents a one-bedroom flat. He has tried to apply for somewhere more secure to live through a housing association, but was told he was number 286 on the waiting list.

It was not always like this.

“Years ago I was on the property ladder, but circumstances dictate that you’re no longer on there, and of course I am now too old and too broke to even consider it, really. Life has got a bit of a habit of kicking you where it hurts,” Trewhella says.

When his parents passed away, any potential inheritance had been eaten up by care costs. So being able to go to work is crucial even at this age.

“My work situation could change at any time. When you get older you know there’s certain things that drop off and go wrong with your body,” Trewhella says.

“If I get into a situation where I can no longer work and I’ve just got my state pension to live on, it is going to be pretty grim. There’ll be no niceties in life.”

For a man who has always taken pride in working, the thought of having to apply for housing benefits and other help is bleak.

“I will have to [apply eventually]. At the moment I’m not a burden on the state. Working is absolutely essential for my mental health as well. So that’s a scary prospect to think about,” he says.

Stories like his will become a lot more common in the years and decades to come.

The Government will spend around £6.7bn on housing benefit for pensioners this year, compared with less than £2bn in today’s money in 1980.

Boosts to the state pension and freezes to local housing allowance mean that the number has come down slightly over the past decade.

But an ageing population and falling levels of home ownership for every generation under the age of 75 are storing up problems for the future.

Already by 2033, the number of private renters aged 65-plus could soar past 1m from around 400,000 currently, according to Hamptons, an estate agent.

It means that if the next government – likely led by Sir Keir Starmer – fails to dramatically increase housing supply and restore the dream of home ownership, the bill will start to mount.

“We should have started yesterday and tomorrow is better than the day after. It’s one of those things that the sooner we get on with it, the better the outcomes will be,” says Neal Hudson, the director of Residental Analysts.

‘Exposed to the market’

Pension age renters are still relatively rare. Some 402,700 households aged 65 and older lived in rented homes in 2021-22, according to the latest figures from the English Survey.

It marks an increase from 257,000 in 2008-09.

But the past 15 years have been characterised by soaring housing costs, stagnating wages and a failure to build enough homes stretching back decades.

The impact is visible in the rise of people living in rented accommodation where their monthly payments will bolster their landlord’s retirement rather than their own.

The share of private renters has risen among every age group under 75 between 2008-09 and 2021-22.

Home ownership rates have recovered somewhat among younger adults since a low point in 2015, but they still remain far lower than at the start of the century.

Some 39pc of people aged 25 to 34 owned their own home in 2022, down from 59pc in 2000, according to the Institute for Fiscal Studies.

This will eventually lead to far more pensioners renting, according to Darren Baxter from the Joseph Rowntree Foundation.

“Because we are seeing a higher rate of people in their 20s, 30s and 40s unable to access home ownership, it is likely that trend is going to get worse. While we are not seeing big increases in housing benefit to that group now or in next few years, it is logical that costs will increase significantly in the future,” Baxter says.

Research from Independent Age has found that around half of all private tenants aged 65 and older are in receipt of housing benefit.

Public spending on housing benefit could rise by as much as 153pc by 2060 in a worst case scenario, the Resolution Foundation found in 2018.

This would result in annual spending rising from £6.3bn to £16bn a year, meaning money that could otherwise have been spent on schools, hospitals and roads would go towards housing.

“The most important thing about home ownership is that it is a hedge against future housing costs. It means that you have certainty in terms of what your housing costs are going to be in retirement. If you’re in the private renting sector, you are exposed to the market,” says Hudson.

“Rents will keep growing. If you’re living on a pension then you may well find yourself squeezed and unable to afford it and in need of greater government subsidy. So it is a big issue for governments in the future.”

Rents have soared since Covid, rising 8.7pc in the year to May across the UK. Such jumps make it hard for anyone to plan how much money they would need in retirement.

A private renter needs to save £391,000 more throughout their lifetime to fund their retirement than someone on the property ladder, according to Standard Life, a pension firm that is part of Phoenix Group.

The research also noted that less than a third of current renters expect to buy a home, leaving close to 11m needing to fund ongoing rental costs in retirement over their lifetime.

Risk of eviction

Not only will the share of people renting into old age grow, but there will also be more older people overall as the population ages.

Projections from the Office for National Statistics show that while there were around 10.8m people aged 65 to 84 in 2020, this figure will rise to 14.4m by 2040.

Meanwhile, analysis by the Pensions Policy Institute suggests the share of homeownership in retirement will fall from 78pc to 63pc by 2041.

The proportion renting privately will rise from 6pc to 17pc, they believe, meaning there could be close to 2.5m older renters by then.

For those who do spend their old age at the mercy of a private landlord, life quality often suffers as a result.

“There’s a real human cost to it as well. You have a situation where people who are retired on low income risk being evicted. We know that can lead to homelessness. The other problem for older people is that they develop additional needs or disabilities like dementia.”

Expecting an individual landlord to manage those things is unrealistic, Baxter says.

Labour has pledged to tear up planning rules and build 1.5m houses while in government, some of which will be for social rent.

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Its manifesto does not go far enough and is not broad enough given the scale of the problem, says Hudson.

“It is a little bit too focused on planning reform, hoping that will fix everything when we know it’s going to need a broader range of policies to actually be effective,” he says.

“Unfortunately, there are no quick solutions because it all ties into the wider issues facing the housing market and the unaffordability of it. It will take years if not decades to have a substantial impact on it.”

Back in Penzance, Trewhella says it is hard to feel positive about the future.

“Sometimes I think, ‘What’s the point?’ What’s the point in still carrying on when you’re dead tomorrow? I’m not depressed. It’s just a matter of fact,” he says.

“My advice to any youngster nowadays is get a really good job and save for your future.

“Don’t think it’s a long way away, because you could go in for a cup of tea one day and then you realise, ‘Blimey, where’s the time gone?’”

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