In this guest article, Gerald Koessl from the National Housing Federation takes a look at the difference between objective and subjective fuel poverty measures, with reference to social rented households in England and Europe as a whole.
According to official fuel poverty statistics 11% of all social rented households in England are in fuel poverty, which is slightly above the national average but significantly lower than in the private rented sector, where almost 1 in 5 (19%) of all households are fuel poor. However, looking at subjective measures of fuel poverty shows a very different picture. Despite living in more energy efficient homes than residents in other tenures, almost a quarter (23%) of all social rented households report that they struggle with keeping their homes warm, the highest proportion across all tenures and more than double the national average (12%). Why is this so?
Objective and subjective measures of fuel poverty
This article identifies some of the underlying reasons for this gap in objective and subjective measures, by drawing on English and European data sources. Objective fuel poverty, which is based on a set of objective measures, including income and fuel costs, will be used interchangeably with the official fuel poverty definition used by the UK Government. This measure classifies households to be in fuel poverty if they have required fuel costs that are above the national median and, were they to spend that amount, they would be left with a residual income below the official poverty line (DECC 2015). This definition of fuel poverty is also called the ‘low income, high cost definition’ (LIHC). According to this definition, every household can be classified into one of the four quadrants (Fig. 2):
Subjective fuel poverty will be used to describe the situation when a household (as part of a survey) says that they are unable to keep their home adequately warm. These definitions are used in the two surveys which have been analysed as part of this research, namely the English Housing Survey Fuel Poverty Dataset (EHS 2013) and the European Statistics on Income and Living Conditions (EU-SILC 2014).
Fuel poverty in social housing across Europe
The high proportion of social renters in England struggling to keep their homes adequately warm also stands out in European terms. The definition used in the EU-SILC is very similar to the one used in the English Housing Survey. The data show that across Europe around 1 in 10 (10.2% in the EU28) households say that they are unable to keep their homes adequately warm. There are however large variations between countries (Fig. 3), ranging from 41% in Bulgaria to only 1% in Norway or Sweden. The figure for the UK is 9%, which is slightly below the EU average but well above many Western and Northern European countries.
Crucially, in a European context, the share of social renters in the UK saying that they are unable to keep their homes adequately warm is disproportionately high. According to this measure, 22% of social renters in the UK are in fuel poverty, which is several times the proportion found for example in Germany (8%), France (7%) or the Netherlands (4%). This comes at a slight surprise given that energy efficiency in social housing in England (although only within a national context) is comparatively high and has been improving rapidly in recent years. In order to understand this peculiarity, we need to turn to the two other key factors determining whether someone is fuel poor or nor, that is, income levels and fuel costs.
For an interactive map on fuel poverty by tenure across Europe visit:
Despite living in more energy efficient homes social renters struggle to keep their homes warm
As already mentioned, the energy efficiency of social homes on average is significantly higher than in the private tenures, as evidenced in SAP and EPC measures[i]. While this also results in below average fuel costs, it is important to consider these costs in relation to household income levels. With a mean household income of £16,000, social renters lie well below the averages of private renters (£29,000) and owner-occupiers (£39,000). In relative terms this means that despite below average fuel costs, social renters spend a significantly higher proportion of their income on fuel costs than households in any other tenure. In fact, social renters on average spend almost double the proportion of their income on fuel bills (6.6%) compared to what owner-occupiers (3.7%) spend (Table 1). In other words, maintaining an adequate level of thermal comfort in their home is costlier in relative terms to a social renter, compared to households in the private tenures.
This has implications for the way in which fuel poverty is officially measured. As already mentioned, the official fuel poverty measure classifies only those as being in fuel poverty who have above average fuel costs and are on low incomes. This means that all those households on low incomes who have below average fuel costs are not counted as fuel poor.
Table 2 shows the average household incomes, average fuel costs and the ratio of the two for all four groups derived from the official fuel poverty statistics. It shows that the LIHC group spend on average 10% of their household income on fuel bills. The table however also shows that with an average household income of £14,000 the LILC (low income low cost) group typically earns £2,000 less per year than the LIHC group. This helps to explain that despite below average fuel costs (£1,040 per year for LILC compared to £1,640 for LIHC), households of the LILC typically spend 8% of their household income on fuel bills, a proportion which is not far off the 10% of the LIHC group.
There are about 1.5m social rented households who fall into the LILC group, accounting for 37% of all social renters compared to only 6% among owner-occupiers and about a quarter (23%) of all private renters (Fig. 5). Put differently, there is a much higher proportion of social renters on low incomes who spend proportionally large amounts of their incomes on keeping their homes warm, even if the absolute expenditure for fuel bills lies below the national average.
By combining the objective and the subjective fuel poverty measures (Fig. 6) we see that the proportions of those saying that they are unable to keep their living room warm are almost as high in the LILC (21%) group as they are in the LIHC (26%) and hence as those who are officially classed as fuel poor and they are well above those in the other two groups (i.e. the HIHC and the HILC where the proportions are only 8%).
Significantly, more than half (53%) of all households in the LILC group are social renters. In other words, despite living in more energy efficient homes and below average fuel bills, there are many social renters who are unable to keep their homes warm in the winter and many are struggling with paying for their fuel bills. In fact, 4 in 10 (40%) households say that they are having difficulties to meet their fuel costs, a proportion which is far above the one for owner-occupiers (12%) and of private renters, of whom around a third (32%) say so (EHS Fuel Poverty Dataset 2013).
This is not to say that alleviating fuel poverty among social renters, both objective and subjective, cannot be achieved via further improvements to the quality and energy efficiency of homes. Rather the opposite is the case. English Housing Survey data shows that the proportion of social renters living in energy efficient homes (i.e. those rated EPC A-C) are much less likely to be fuel poor than those living in homes with medium to low energy efficiency. This is the case both in terms of objective and subjective fuel poverty measures. Fuel poverty is of course also impacting very differently on different household types and people of different ages. With a concentration of older and single households, social tenants are more vulnerable to suffer from the health consequences of living in a cold home. This shows that while it is crucial to address fuel poverty as an issue across all tenures, we shouldn’t forget about large the socio-economic divides between the tenures in England, divisions that are much more significant than in other European countries with less polarised housing markets.
EU-SILC 2014: European Union Statistics on Income and Living Conditions, available via Eurostat: http://ec.europa.eu/eurostat/web/income-and-living-conditions/data/database
EHS 2013: English Housing Survey, Fuel Poverty Dataset 2013, available via UK Data Service: https://discover.ukdataservice.ac.uk/
DECC 2015: Department for Energy and Climate Change, Annual Fuel Poverty Statistics Report, 2015, available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/468011/Fuel_Poverty_Report_2015.pdf
[i] Energy and environmental performance of buildings are commonly measured by using a methodology called Standard Assessment Procedure (SAP), resulting in SAP ratings. SAP ratings reflect the level of energy consumption per unit floor area: the higher the SAP rating, the more energy (and fuel costs) a household spends per square metre. Numeric SAP measures can be classified into a banded rating, used for issuing Energy Performance Certificates (EPC rating). EPC ratings were introduced as part of a European Union initiative to drive down energy costs and have seven bands, ranging from A (most energy efficient) to G (least energy efficient). The Energy Efficiency Directive, issued by the EU, requires all buildings that are constructed, sold or offered for rent in the UK to have an EPC. EPCs consist of two modules: a) the Energy Efficiency Rating, which measures fuel costs per square metre and b) the Environmental Impact Rating, which measures CO2 emissions (Source: Government Guideline for the Standard Assessment Procedure: https://www.gov.uk/guidance/standard-assessment-procedure)