Social housing landlords must have the ability to hike rent payments by £3 a week to prevent the continued “managed decline” of council homes, ministers have been warned.
By Kumail Jaffer, Local Democracy Reporter
Social housing landlords must have the ability to hike rent payments by £3 a week to prevent the continued “managed decline” of council homes, ministers have been warned.
London Councils, a cross-party group representing the capital’s local authorities, said the government’s commitment to reinstating ‘rent convergence’ in the UK at this year’s budget was welcome.
The policy, which was first implemented in 2002 before ending in 2015, ensured residents in similar socially rented properties paid a “formula” rent.
In London, this would mean any social landlords currently renting their properties for under the average tariff of £130.22 a week would be able to increase rent by up to £3 a week until it hit that level.
Currently, landlords can only increase rents by the Consumer Prices Index (CPI) +1 per cent per annum – which was 2.7 per cent in April.
London Councils have also called for a new London Formula Rent Reset, which will give councils more flexibility over setting social rents to reflect the city’sa high property costs.
They said that without the reforms, boroughs in the capital face a real-terms reduction of £269million in spending on council housing repairs, management, and resident services over the next four years.
Local authorities in London currently own and let around 390,000 social homes, equivalent to more than one in 10 households.
Cllr Grace Williams, London Councils’ Executive Member for Housing & Regeneration, said: “Boroughs are determined to build new council housing and to improve standards in existing homes.
“However, at a time when boroughs want to invest more, the squeeze on our housing resources mean we are instead in a state of managed decline, and we find ourselves forced to plan significant spending reductions.
“The Budget must be a decisive moment for turning this around and fixing the crisis in council housing finances. The government is taking important steps to restore stability to the social housing sector, and the reintroduction of rent convergence will potentially bring a major boost.
“London faces the most severe housing pressures in the country, with one in 50 Londoners living in temporary accommodation and in need of a permanent home. We are keen to work with ministers in ensuring that a renewed approach to rent convergence is fair for tenants, puts council housing budgets in a healthier position, and enables the investment in standards and new social homes we all want to see.”
Ian McDermott, chair of the G15 group of London’s largest housing associations and Chief Executive of Peabody, added: “The return of rent convergence at £3 per week is essential if we are to stabilise social housing finances and tackle London’s housing crisis.
“Housing associations in the capital are facing the same pressures as councils; rising costs, squeezed budgets, and the need to invest in building safety, decarbonisation, and better homes and services for residents. As not-for-profit landlords, G15 members reinvest our income into homes, services and support, but with an average weekly rent of just £128 in the capital we are increasingly under pressure.
“Without an equitable and fairer rent system, our ability to invest in both quality and much-needed new supply will be significantly constrained. Convergence of £3 a week until rents reach the government’s target social rent level would enshrine affordability for residents whilst providing the foundation for a fairer, more sustainable and properly funded social housing system in the future.”
In June Housing Minister Matthew Pennycook wrote to social housing providers saying it would implement a “convergence mechanism” to help boost levels of investment in council homes.
He wrote: “Such a mechanism would allow rents on social rent properties that are currently ‘below formula’ (i.e. lower than the usual maximum that may be charged when a property is let to a new tenant) to increase by an additional amount, over and above the CPI+1% limit, up to formula level.
“This would be far fairer than a higher across the board rent increase, as it would only ask those who currently pay lower rents to pay a bit more.”
However, he said the subsequent consultation would only allow providers to choose between hiking rents by either £1 or £2 a week.
A spokesperson for the Mayor of London told the LDRS: “The Mayor has delivered a record number of social and affordable homes, but there is still a long way to go to fix the housing crisis in London. He is determined to continue doing everything possible to ensure Londoners have the affordable homes they need.
“The Mayor welcomes the Government’s commitment to implement fairer rents. He supports a rent convergence rate of £3 per week, which is aligned with the position taken by delivery partners. Rent convergence will support the housing sector to invest in existing stock, meet new costs associated with upcoming regulatory requirements and place the sector in the best position to increase housing delivery.”
A Ministry of Housing, Communities & Local Government spokesperson told the LDRS: “We have taken decisive action on social rents with a new long-term 10-year settlement for social housing rents, giving housing providers long-term certainty so they can build more homes.
“Alongside the £39 billion we’ve invested to create the biggest boost to social and affordable housing in generation, this will give more people access to a secure home.”
