30 September, 2019
In February this year the Government set out the new policy statement for rents on social housing effective from 1 April 2020. This policy replaces the Guidance issued in May 2014 and will apply to Registered Providers including private Registered Providers of Social Housing and Local Authorities that are registered with the Regulator of Social Housing. The new policy follows a consultation where 86% of social landlords were in favour of the change while 87% of tenants were opposed to the idea.
While tenants may not like the idea of social rents increasing this policy aims to strike the right balance between the interests of existing social housing tenants who pay some or all of their own rent, the need to build more homes, and the importance of ensuring that Registered Providers have sufficient income to manage and maintain their properties.
To put this new policy into context, since 2001 'social rents' have been set based on a formula set by the government, this new policy follows a similar process with the formulas set out in the policy statement.
In 2011 Affordable rents were introduced and set at up to 80% of the market rent (inclusive of service charges).
From April 2015 the government allowed social landlords to charge a full market rent where a social tenant household has an annual income of at least £60,000. This change allowed landlords to make better use of their social housing for properties rented to households with relatively high incomes.
The last significant change, the 'social rent reduction', came into effect in April 2016 and required social landlords to reduce their rents by 1% each year for 4 years. Although there were exceptions to this policy, landlords need to be aware that the Rent Reform effective from 1 April 2020 will not override landlords' statutory obligation to complete the four year social rent reduction as required by the Welfare Reform and Work Act 2016. If the social rent reduction has not been completed by a landlord by 31 March 2020 (because its rent year begins after 1 April) the reduction must be completed before the new policy can be applied.
The key points for Registered Providers to consider before the policy comes into effect on 1 April 2020 are:
It is also important for Registered Providers to remember that the above provisions are also subject to 'fair rent' requirements and any tenant who has this protection must not be charged more than the lower of the 'fair rent' set by the rent offer and the formula rent.
This policy should help to provide some of the much needed funding to enable Registered Providers to maintain and expand their current housing stock in line with the needs that have been identified nationwide for affordable social housing.
Please click here to view the Policy statement on rents for social housing.