Rent setting: Just because you could, does it mean you should?
My mum used to tell me ‘Just because you could, doesn’t mean you should’ – she’s a smart woman and her advice applies as much to rent setting as to whatever else she may have had in mind.
The rent settlement means housing associations are able to raise their rents each year by CPI +1% from 2020 for the following five years. This is excellent news for business plans and development plans, but what does it mean for affordability?
The approach of capping social rent increases at inflation plus 1% was designed when real incomes were increasing ahead of inflation. This meant that, even if inflation was high, you could have implement CPI+ 1% rent increases while still having reassurances that it linked to the same level of affordability.
However, we are now seeing real incomes stagnate and, in some cases, fall. This means that, while rent formula prevents housing associations setting high rents, it does not guarantee the continued affordability of ‘social rent’. This is why we suggested in the CIH Building Bridges report that local authorities and housing associations work together to establish what a genuinely affordable rent is in an area and develop Local Housing Affordability Frameworks.
Now the rent settlement has been announced, a lot of number crunching will be going on to determine what it means for the business plan. But this should not be done in isolation to housing providers’ objectives and without taking into account local housing needs.
Rent increases could and should be cleverer than that. They should aim to support Local Authorities to find affordable options for those on their waiting lists and with homeless duties. Rent levels should ensure housing associations can house those they have made it their mission to house. Local Housing Affordability Frameworks could help enable this by guiding housing associations on rent levels and by forming part of the local Strategic Housing Market Assessments.
The rent settlement means housing providers could raise their rents each year by CPI +1% from 2020, but they should consider my mum’s advice and think hard about whether they should!
If we can help your organisation on any housing issues please contact Gemma Duggan at email@example.com or 07586 325 368