Long-term rent settlement and convergence could generate nearly £1bn extra for G15

CPI plus one per cent with £3 extra per week for five years would generate £329.6m in additional income, the group estimated. 

Alternatively, CPI plus one per cent with £5 extra per week for five years would bring in £424.1m in extra income.

“This extra income would allow for continued investment in our existing homes, whilst also allowing us to contribute to the delivery of new homes,” the G15 said in its report.

“While we acknowledge the extra strain this could place on residents and the public purse, we believe it is a necessary step towards restoring our finances, rebuilding capacity and enabling us to continue providing safe and affordable homes for residents, whilst delivering new homes for those most in need.

“Front-loading capacity (via a £5pw mechanism) would put us in a stronger position to begin developing again by the second half of this parliamentary term; without this capacity, that development would be at risk.

“We would encourage extra spending on rents to be viewed as investment in the sector which carries long-term benefits for both residents and government.”

The G15 said that diverging rents also comes down to “a matter of fairness”.

The group does not believe it is right that two neighbours living in identical homes should be paying different rents because of historic policy decisions. This can be anywhere from £2 to £100 difference in weekly rent for the exact same home.

“The unique impact on London means that a decision to re-introduce convergence would predominately benefit the financial health of London-based landlords and free up capacity for development, something that is desperately needed in the capital,” the G15 said.

The group said that when the government ended rent convergence in 2015, one in four G15 homes had not yet reached formula rent.

The G15 said ending convergence early has had a “devastating impact” on housing associations’ financial capacity, with its members losing £211.4m in rental income since 2015 and missing between £5.3m and £52.9m a year in rent alone.

This means members have on average £400 less to invest per social rented home per year than if rents had been allowed to converge.

The G15 said that rent convergence holds “even more significance given the unprecedented financial challenges the sector is facing”.

The G15 is forecasting a spend of £3.6bn on building safety works between 2021 and 2036.

G15 members are expected to incur costs of around £1.2bn to bring all general needs properties up to Energy Performance Certificate Band C by 2030. In total, achieving net zero is expected to cost G15 members between £10bn and £11bn by 2050.

Members have collectively seen a 50 per cent increase over the past five years in the average maintenance and major repairs cost per unit.

In the year to April 2022, the cost of materials for repairs and maintenance rose by 16.8 per cent and building costs increased by 25 per cent.

The G15 added that it expects preparing for the implementation of the new Decent Homes Standard and Awaab’s Law will impose “substantial additional costs”.

“Therefore, we ask that the ministry urgently discuss the possibility of reintroducing rent convergence with the Treasury as part of its discussions about the future rent settlement,” the G15 said.

“We believe that the policy as originally conceived was both fair and affordable, balancing the needs of current and future tenants.”

Housing secretary Angela Rayner revealed at the Social Housing Annual Conference in November that she was pushing her cabinet colleagues for rent convergence.