Government confirms permitted rent rises of 7.7% for 2024-25 in England

Formula rent increases

The maximum weekly rent for a tenant who is granted tenancy of a property for the first time (ie new properties and relets of older properties), is ‘formula rent’. This is set via a calculation for each property based on the relative value of the property, relative local income levels, and the size of the property. Government guidance instructs that these calculations are initially made at 2000-01 levels, with formula rent inflation then applied on top of this for each year, to arrive at the latest year’s figure.

When the government intervened to cap annual rent increases at seven per cent for the current financial year (2023-24), this applied to rents for existing tenants of social and affordable rent but not to calculations for formula rent and therefore the maximum initial rent when properties are first let or subsequently re-let. In these instances, rents could have been calculated at an 11.1 per cent increase for the year.

Now the RSH has confirmed the 7.7 per cent rate of inflation for 2024-25, which should be used to adjust formula rents.

However, ‘formula rent caps’ also apply as a maximum ceiling, and these depend on the size of the property, calculated by the number of bedrooms.

As explained in the government’s policy statement on rents for social housing, published in December 2022, where the formula rent would be higher than the rent cap for a particular size of property, the cap must be used instead.

So, when calculating weekly formula rent, if the 7.7 per cent increase in 2024-25 is more than the cap for that size of property, the latter must be used as a ceiling. 

The formula rent caps, set out for 2024-25, are: £188.04 for one-beds and bedsits, £199.09 for two-bedroom homes, £210.15 for three-beds, £221.19 for four-beds, £232.26 for five and £243.31 for homes with six or more bedrooms.

The RSH said in its ‘Rent Standard – from April 2023’ document: “Registered providers must comply in full with all the requirements and expectations set out in this 2023 Rent Standard.

“They must additionally comply with all the requirements and expectations of the Rent Policy Statement on the setting, increase and decrease of rents and service charges.”

The standard does not apply to shared ownership low-cost rental accommodation, intermediate rent accommodation, specialised supported housing, relevant local authority accommodation, student accommodation, temporary social housing, care homes and private finance initiative social housing.

Yesterday’s updates effectively confirm the uplifts permitted under the Rent Policy Statement, based on the September CPI.

Tenanted social housing rent increases

Housing providers and trade bodies recently told Social Housing of the need for a long-term rent settlement as they approach the challenge of budgeting for future rent levels and business-planning amid continued uncertainty. 

Without a government announcement saying otherwise, providers Social Housing spoke to had largely assumed that rent-setting in 2024-25 would return to a permitted rise of up to CPI plus one per cent in 2024-25.

Now this has been confirmed, and providers are thus able to raise rents by up to 7.7 per cent for the year beginning April 2024.

The current five-year rent settlement, spanning 2020-21 to 2024-25, permits providers to increase rents by CPI plus one per cent. However, the current financial year of 2023-24 was an exception after government intervened in November 2022 to cap annual rent increases at seven per cent, following a consultation.

This came after inflation soared during the cost of living crisis, reaching 10.1 per cent in September 2022. Under the CPI plus one settlement, without the seven per cent cap, providers would have been permitted to raise rents by 11.1 per cent.

As part of its response to the consultation in December last year, DLUHC made it clear the cap was temporary and only applied to 2023-24, however some sector stakeholders feared further intervention from government.

Providers are now awaiting clarity on social housing rent policy post 2024-25, when the current five-year settlement ends.

DLUHC has said it will consult on this in due course.

However, any date announced will be later than the initial timeline set out in its cap consultation response in December last year, when government said it would consult on the post 2025-settlement during 2023.

Update: at 10.00am, 8.01.2024

The article was updated to correct a previous statement that DLUHC was the publisher of the Rent Standard and the ‘Limit on annual rent increases 2024-25 – from April 2024’ document – both of which are published by the RSH. The DLUHC policy statement sets out that limits on rent are calculated from the September CPI. The RSH document published on 4 January uses that CPI number to calculate the relevant tables for landlords regarding the annual percentages for inflating rent.