Are your rents heading in the right direction?

With rent from social housing lettings accounting for more than 65 per cent of sector turnover, implementing the rent reduction has been a significant financial challenge which providers have met thus far.

As well as presenting a financial challenge, the switch to the Welfare Reform and Work Act 2016 regime has introduced additional complexity into the requirements governing rent increases which providers have also had to contend with.

Getting it right

In our recent round of regulating providers’ rents based on the SDR data, we have found that some had made reporting errors in their rents data, but some had also made mistakes in the way that they had interpreted the legislation or errors in how they applied it in setting their tenants’ rents.

The regulator has taken a proportionate approach in how we have dealt with these cases, recognising the additional complexity that the new regime has introduced.

However, it is important that providers are aware of the greater risk and potential for error and that boards’ get appropriate assurance that these issues are being managed effectively in their organisation.

From our dealings with providers since the introduction of the rent reduction, we have become aware of a particular issue with how people have addressed the rent reduction in relation to ‘fair rent’ properties.

Anecdotal evidence from providers, coupled with findings from our rent regulation against the first year of the rent reductions, have indicated a couple of problems with how people have addressed fair rents.

‘Fair rents’

The legislation in this area is complex.

There exists an exception for ‘fair rent’ properties from the rent reduction but only in limited circumstances. This is where the actual rent registered by the fair rent officer is less than the social rent rate.

Some providers interpreted this wrongly, with the most common interpretation being where the actual rent charged is less than the social rent rate.

This is incorrect and has led to a number of providers not applying the rent reduction to a large proportion of their fair rent properties as they should have done.

This has meant some providers have had to refund tenants where the rent reduction has not been implemented.

Anecdotally we have also heard that providers are under the impression that all fair rent properties are excepted from the rent reduction.

As indicated previously this in incorrect as the exception for fair rent properties only exists in very limited circumstances.

Where providers are unsure about the fair rent exception or any other issue under the legislation they should take professional advice.

Although this issue has arisen with a small number of providers, our regulation of the wider sector tells us that providers have worked hard to ensure that they comply with the legislation.

It’s imperative that providers’ boards stay on top of the complexities of rent setting, especially where they have tenants with older Rent Act 1977 tenancies.

Maintaining the trust of the public and government by charging rents in line with the law remains a key issue for boards.

The regulator will continue to monitor rents closely and take appropriate action where we identify evidence of non-compliance.

Jim Bennett is assistant director for regulatory strategy at the Regulator of Social Housing.