Social housing sector reacts to reports of new 10-year CPI plus 1% rent formula

More sector reaction

Tracy Harrison, chief executive of the Northern Housing Consortium, said: “These are welcome signs that the government has been listening to the sector. Over the past 10 years, we have seen the rent settlement changed repeatedly – despite a previous 10-year guarantee. This has fundamentally undermined the business model of social housing providers, impacting much-needed investment in new and existing homes.

“We need a 10-year rent guarantee of CPI plus one per cent to support housing providers to unlock a new wave of investment, in both developing new homes and improving existing homes. We look forward to the government’s decision on this in the autumn Budget.

“We and others have been consistently asking the government to deliver a long-term financial settlement for the social housing sector, including long-term certainty over rents and future grant funding. Crucially, the sector needs to see a new Affordable Homes Programme, with the scale and flexibility to meet the North’s affordable housing challenge, as landlords plan their future developments beyond the existing programme.”

Kate Henderson, chief executive of the National Housing Federation, said: “Today over eight million people are living in unsuitable, unaffordable homes, or they are homeless. Housing associations are ready to work with the government to end this crisis, but they need the right package of enabling measures from the government in order to do so.

“Housing associations are under pressure because of higher operating costs driven by, among other factors, the recent period of high inflation and unfunded fire and building safety remediation costs. A combination of rent reductions and caps have meant rental income is 15 per cent lower in real terms than it was in 2015; this equated to £3bn in lost rental income for housing associations last year. This has inevitably led to a reduction in plans for building new affordable and social housing at a time when they are needed more than ever.

“We welcome the government’s commitment to set out plans at the next fiscal event to provide greater rent stability to social landlords so they can have the certainty they need to plan investment in new and existing affordable homes over the long term whilst ensuring social rents remain affordable for residents.”

A spokesperson for Peabody said: “Decades of underfunding and disrupted rent policies have significantly diminished the sector’s financial capacity, and any steps that can bring us more stability will help us to deliver more for residents.

“We’ve been calling for a solid, long-term plan – and talk of a rent settlement that’s linked to inflation and set for 10 years is very welcome. With the right support from the government, we’re optimistic about the future.”

Clare Miller, chief executive of Clarion Housing Group, said: “Cuts to the rent settlement over the past seven years have had a destabilising impact for all social landlords, resulting in a loss that has now increased to £120m a year at Clarion, and £560m in total since 2017.

‌

“A 10-year rent settlement of CPI plus one per cent would give us the certainty we need to plan investment in our existing properties over the long term and would mean rents are affordable for tenants and still lower, in real terms, than they were in 2015.

‌

“With this injection of stability, we would also be provided with the confidence to deliver ambitious build plans over the long term, and help the government to realise its vision of building much-needed new social and affordable homes at scale.”

Geeta Nanda, chief executive of Metropolitan Thames Valley, said: “Long-term stability and certainty on rents are essential to the housing sector, and we are encouraged to see that the government’s recognises this. 

“A long-term settlement on social rents as part of a package of support measures, will better enable housing providers to meet the growing challenges of investment in existing homes alongside the delivery of desperately needed new, social and affordable homes.

“We look forward to further engagement with government on this and to working with them on our shared ambition of tackling the housing crisis once and for all.”

Ian Fletcher, director of policy – real estate, at the British Property Federation, said: “A 10-year rent settlement in the social housing sector would be a good way of boosting the supply of affordable homes. It would encourage greater investment in the sector by providing the certainty and stability that investors seek in investing in the sector.

“For example, long-term investors, such as pension funds, who want to match their investment returns with their liabilities paying pensioners. It would also reduce risk in the sector and therefore allow it to raise capital at lower rates, in effect a form of subsidy. We are therefore encouraged to see the new government is considering this.”

Imran Mubeen, a director at Newbridge Advisors, said: “We would welcome the potential inclusion of a long term rent settlement above inflation in the chancellor’s October’s budget, with a commitment to CPI plus one per cent over 10 years. This will naturally present an opportunity for housing associations to breathe new life into their business plans and explore new investment opportunities with greater certainty over future income.

“We expect this will be appealing to investors, and it has been a subject of strong focus on roadshows over recent times.  Housing associations will still need to carefully consider how they deploy new investment to balance between the competing pressures across existing homes and the delivery of much needed new homes, whilst ensuring rents remain truly affordable for residents.”

Emma O’Shea, chief operating and technology officer at Aster Group, said: “Our sector has long been calling out for more clarity on social rent and we would welcome the certainty of a 10-year plan. Consistency in how social rent is calculated would give us the stability to invest even more in our customers’ homes so they’re as safe, comfortable and sustainable as possible, and meet their evolving needs.

“This ability to plan for the longer term means we would also be able to play our role in helping the government achieve its ambitious housebuilding targets, by helping deliver more much needed new affordable homes.”