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The Chartered Institute of Housing is the independent voice for housing and the home of professional standards

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Rent setting - England

Last updated Date:13/09/2012


Rent setting - England

Latest news

Recently the coalition government has begun exploring ways in social landlords could set different levels of rent for different tenants. This includes:
  • The introduction of 'affordable rent' - rent set at up to 80% of market rent, with the additional income being used to help fund the development of new homes. For more information about this see the Affordable Homes Programme
  • A recent consultation on 'pay to stay' - whereby tenants whose income exceeds a certain level could be charged a higher rent if they wish to remain in social housing.

CIH submitted a response to the consultation which closed on 12 September.

Background

Rent restructuring was introduced in 2002 by the then Labour Government.  It was an attempt to develop a fairer system of affordable rents in the social housing sector and to end the inconsistency in rents being charged by different landlords for similar properties in a similar locality. 

A formula rent (target rent) was calculated by Governnent to which actual rents for each individual local authority and housing association home would converge to by a target date of 2011/12.  The  formula rent is based on a combination of individual property values and average earnings in each area.

To move towards the formula rent, Government proposed  a national guideline rent for local authoritieson an annual basis.  The formual for calculating guideline rents is RPI + 0.5% plus £2 per week.  RPI is taken as the September in the year previous to the 31 March.

The regulatory body for housing associations (now the Social Housing Regulator) governs and issues annual guidance for the implemetation of the rent influencing regime for housing associations.  In addition, a rent standard for housing association rents was introduced in 2010 as part of a wider regulatory framework for housing providers. 

Under the principles of the new local self-financing system for local authorities, local authorities are free to set their own rent levels.  In practice this is problematic as the inherited debt from the previous local authority financing regime, the HRA subsidy system, is subject to a Government rent formula.  If the rent formula is not applied, then the local authority could face problems repaying back the debt.    
  
The Coalition Government has continued with the rent restructuring policy but with a revised target convergence date of 2015/16.

Our view

CIH is keen to lead a mature debate about potential changes to rent setting policy involving and building on the sectors' views and expertise.  We believe that any further changes in the way rents are set for social housing need to be considered as part of a wider conversation about the nature and role of social housing. 

Whilst we recognise that there is a fundamental need to ensure scarce resources are used effectively and appropriately, we believe a system than provides incentives is more efficeint in achieving results.

Helpful links

CIH response to the 'pay to stay' consultation - September 2012

Future options for rents and rent setting (CIH and L&Q) - September 2012

CLG High Income Social Tenants: Pay to Stay consultation - June 2012

 

 


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