At St Martin-in-the-Fields Charity, we believe everyone deserves a safe place to call home. Yet, economic challenges continue to push many people into difficult, unstable housing situations. And too many are left without the support they need to regain security and stability.
In this article, we explore some of the key economic causes of homelessness, and whether enough is being done to address them. We also highlight how you can help people find, and keep, a safe place to call home.
Before we get started
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What are economic causes of homelessness?
While each person faces their own unique circumstances, homelessness often stems from a few key societal issues, known as the structural causes of homelessness. These structural causes are closely linked to economic factors which the average person has very little control over.
While individuals might be able to influence their income to some extent, various economic factors play a role to their financial stability. Rising living costs and limited statutory support mean finances have to stretch further, turning a once-livable wage into barely enough for housing and essentials—leaving many at greater risk of homelessness.
Within our Frontline Worker Survey 2024, 84% of homelessness workers reported increased demand for their services in the 12 months before January 2024. This, in part, is a consequence of the following economic factors.
Lack of social housing
If someone is unable to afford a private rental home, they may be able to seek more affordable social housing. That being said, being eligible for a social home is one thing and securing one is another.
Despite rising private rental costs, the proportion of affordable or social housing in relation to England’s entire housing stock has fallen from 20% in 2000 to 16% in 2023, according to government figures. So, while new homes might be being built, less of them are accessible to those on low incomes. This decline in social housing, due to insufficient funding, is a key economic cause of homelessness during a time of high demand.
The shortage of available social housing leaves people on long waiting lists, often in unsuitable temporary accommodation like hostels and B&Bs—and it’s not only adults who are affected. The social housing crisis has also contributed to a rise in youth homelessness, with more than 150,000 children now living in temporary accommodation across England – the highest number on record.
High rental costs
Perhaps the most significant economic cause of homelessness is high rental costs. With many people already being priced out of purchasing their own home, the next option is to rent. However, this too has become increasingly unaffordable.
Between February 2023 and 2024, average UK private rents rose by 9.0%. This not only makes it more difficult for people to secure a rental property but also puts existing tenants at greater risk of being forced out of their homes if their rents are increased. In fact, bailiffs carried out 2,682 evictions in the first quarter of 2024 across England and Wales, which is higher than any time in the previous six years, the Guardian reports.
Once someone has been evicted or chosen to leave their rental property because it has become too expensive, it isn’t always easy to secure suitable alternative accommodation, particularly for larger households. Properties of a similar size are likely to have increased in line with their previous home, making them just as unaffordable. Consequently, this has resulted in an increase in the number of families renting smaller homes which may not sufficiently accommodate their needs.
We strongly believe that no one should have to choose between living in unsuitable conditions or facing homelessness over a relatively small fee like a month’s rent or a minor debt. That’s why we help people experiencing or at risk of homelessness through our VRF grants, providing them with emergency funding so they can keep their current home or secure alternative accommodation. Your donations to St Martin’s Charity give people the helping hand they need to begin transforming their lives for the better.
Support St Martin-in-the-Fields Charity and help transform lives.
Rising cost of living
With people’s finances already being squeezed by higher rental prices, the cost of living has also been on the rise. A survey conducted between 17 and 28 January 2024 as part of the latest Public opinions and social trends bulletin found that 41% of people who pay energy bills said it was very or somewhat difficult to afford them.
The rising cost of living wouldn’t be such a prominent economic cause of homelessness if people’s wages had increased at a similar rate, but that hasn’t been the case. As of September 2023, over 3.5 million workers earn less than the real living wage set at £11.95 in London and £10.90 across the rest of the UK.
This makes affording basic necessities completely unachievable for people on low incomes, particularly if they have to support their family. It has contributed to more people being at risk of homelessness and a greater reliance on provisions such as food banks. The Trussel Trust, which runs a network of food banks across the UK, has seen a 94% increase in the number of people accessing food banks over the last five years, up to March 2024. Additionally, 88% of respondents in our annual Frontline Worker Survey said they are supporting people who are going hungry.
Thankfully, the government has announced a handful of policies within the Autumn Budget that should help to tackle the cost of living crisis and have a positive impact on homelessness. These include a rise to the national minimum wage which should provide a major boost for people on low incomes.
Insufficient benefits support
Unfortunately, a key decision in the budget was to continue to freeze the Local Housing Allowance (LHA), a benefit designed to help low-income renters with housing costs. The LHA is set at the 30th percentile of rents in an area and will remain frozen until 2026. This decision highlights one of the main economic causes of homelessness, as only those within this bracket receive support, leaving households just outside it without assistance despite rising costs.
Consequently, supposedly affordable rental homes are becoming increasingly unaffordable, potentially leaving low-income households with nowhere suitable to live, ultimately increasing their risk of homelessness.
This benefit freeze is just the latest in a long history of cuts which have acted as long-term contributors to the rise in homelessness. Low-income households have had to make do with a lack of support for decades with benefit reforms having taken place since the late 1990s. While this did encourage more people to enter employment, they were often only able to secure low-paid, part-time jobs, limiting the extent to which they could improve their financial situations. Again, this has left people more susceptible to homelessness.
Lack of funding for key services
In addition to benefits cuts, key services closely linked to homelessness have also not received enough funding. This includes funding for both government services such as the NHS, and for homelessness charities.
The NHS is under increasing strain, with mental health services being particularly affected. Homelessness and mental health are closely tied. All too often, people facing challenges with their mental health struggle to receive the support they need, contributing to more people first experiencing homelessness and leading to their condition deteriorating further once they’re without a home. This is reflected in research by the Centre for Mental Health, finding that 90% of homelessness services state their clients experience barriers to mental health care. Results from our Annual Frontline Worker survey showed that more than 75% of respondents find it difficult or very difficult to access mental health services for their clients.
Addressing the lack of funding for NHS services was a key element of the Autumn Budget, with the government pledging the NHS an extra £25.7 billion over this year and next. While it remains to be seen how much of a difference this will make, additional funding should benefit mental health services which could have a positive effect on rates of homelessness.
Conversely, the latest budget failed to provide any mention of over £1 billion worth of funding for crucial homelessness services which is due to come to an end by April 2025, as reported by Inside Housing. This is of deep concern to homelessness organisations across the country, which are already facing strain due to rising demand for their services.
Cuts like this are one of the leading causes of homelessness, making it increasingly difficult for organisations to help people secure accommodation, run their facilities, and recruit skilled professionals. Our Frontline Worker Survey 2024 found that 58% of workers reported their ability to help people access appropriate accommodation to help them out of homelessness had decreased (up from 42% in 2022). Additionally, 51% of workers reported that they ‘always’ or ‘often’ feel at risk of burnout, further highlighting how there isn’t enough staff to effectively distribute cases so everyone has a manageable workload.
That’s why your donations are more important than ever. By supporting our Frontline Fund, you help incredible charities across the UK provide dedicated homelessness services, ensuring everyone can receive support and have a safe place to live.
